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Ormet, AEP In Power Struggle

Electricity utility says rates will go up for Ohio aluminum plant

August 18, 2012
By CASEY JUNKINS - Staff Writer , The Intelligencer / Wheeling News-Register

HANNIBAL - American Electric Power officials hope Ormet Corp. can maintain operations at the Hannibal Primary Aluminum Reduction Plant so the 1,000 employees there can keep their jobs.

But AEP Ohio spokesman Jeff Rennie said Ormet soon will pay AEP more for electricity, thanks to a recent ruling by the Public Utilities Commission of Ohio. This leaves the Ormet workers with an uncertain future.

"The ruling from the (PUCO) will raise Ormet's power rate. The rate will still be below what we would typically charge a company like Ormet," Rennie said while declining to specify the rate. "Ormet has enjoyed this same discounted rate since October 2009."

Article Photos

Photo by Casey Junkins
The price of energy provided by American Electric Power leading into the Ormet Corp. Hannibal Primary Aluminum Reduction Plant may increase to such a rate that Ormet is forced to cut nearly 1,000 employees.

Ormet President and Chief Executive Officer Mike Tanchuk, citing market pressures and rising AEP rates, said the company may need to lay off nearly 1,000 workers. A Worker Adjustment and Retraining Notification Act notice Ormet filed last month states the first round of job cuts will take place by Sept. 18, with the remainder to take place by the end of the year.

Tanchuk said the initial labor reduction will only impact 30-50 workers, but he said the company may have to shut down the plant because of the poor market conditions and increased power costs.

"We recognize that Ormet is in a tough place because of their market pressures," Rennie said, again emphasizing that Ormet's new rate will still be lower than what AEP would generally charge. "We hope Ormet can maintain their operations."

Last week, the PUCO decided to freeze AEP's base generation rate at current levels until May 31, 2015.

Under the terms of the order, AEP is directed to file with the PUCO a detailed competitive bidding process by Dec. 31. Customers will still see a 6 percent to 7 percent increase in monthly bills this year, but no resident or business will be responsible for more than a 12 percent increase.

This is the PUCO ruling Rennie said will increase Ormet's power rate, which he said should go into effect next month. This would coincide with Ormet's initial round of planned job cuts.

Tanchuk said Ormet officials are still reviewing the PUCO verdict and evaluating their options.

"This is a fairly complex ruling, so we are still reviewing it. We will have to see how it is going to impact us," Tanchuk said.

"We continually have discussions with AEP," he added. "We are obviously hoping we can resolve this."

Ormet posted a $1.1 million net loss for the first three months of 2012, but company officials spent $1.9 million during that time to reline 22 pots at the Hannibal facility. In the first three months of the year, workers shipped 67,981 metric tons of product, compared to 58,079 tons during the same time in 2011.

The WARN notice states the "curtailment of operations and reduction in force is expected to be indefinite." It also notes that the workers represented by the United Steelworkers union will be recalled to work in accordance with seniority provisions. Last year, Ormet officials inked a new five-year contract with union workers at the Hannibal plant.

AEP announced plans last year to close its Kammer Plant south of Moundsville, citing increased air pollution regulation by the U.S. Environmental Protection Agency. The Kammer facility opened in the late 1950s, primarily for the purpose of supplying electricity for the Ormet plant, though it does not do this anymore.

Rennie said the closing of the Kammer Plant - which he said is slated to be complete by June 1, 2015 - has nothing to do with the Ormet situation.

"We have adequate supply for them - that is not the issue," he said.

AEP officials previously said about 60 workers would be displaced by the closure of the Kammer Plant, pledging to make the transition as smooth for these employees as possible.

Rennie said Ormet would need to ask the PUCO for more assistance with power rates if the company needs it.

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