After more than a month of deliberating, the West Virginia Public Service Commission has issued an order in the rate hearing case for Century Aluminum and its Ravenswood smelter.
So did Century get the rate it wanted, yes or no?
Well, it's not that simple. The order itself is 73 pages long. Click here to see the full report.
The PSC said in a news release that it granted Century a special rate, but it spares other ratepayers the burden of Century's electricity costs.
Century requested a 10-year special electric rate in May in order to re-open its smelter, which closed in 2009.
The broad outlines of its proposal were that other Appalachian Power ratepayers would bear the risks of Century's electricity costs during aluminum-market downturns, and the company would repay that during up markets.
In today's order, the commission states that it "rejects, in part, the Century … proposal for a special rate but establishes a special rate that the Commission believes satisfies the policy goals of the Legislature and incorporates mechanisms that address the concerns of Century regarding the reopening of its Ravenswood smelter and balance the interests of present and future utility service customers of Appalachian Power Company, the general interest of the state's economy and the interests of APCo."
According to the news release, the risk is placed on Century, asking its parent company to make a corporate guarantee to Appalachian Power to assure the payment of any revenue shortfalls.
The special rate mechanism Century could take establishes a minimum rate that Century is "ultimately obligated to pay," along with a cash payment rate based on aluminum prices that Century pays on a current monthly basis that is connected to the market price of aluminum on the London Metal Exchange.
The order also establishes a tracking account to show revenue shortfalls or excess revenue when the market rate of aluminum is higher or lower than the minimum rate Century is ordered to pay.
The minimum rate, according to the PSC, was calculated to show a reduction of the Appalachian Power tariff rate in two ways - a coal severance tax credit, which the West Virginia Legislature passed in March, along with a fixed cost credit.
The fixed cost credit is a relief to Century of the $20 million per year portion of the fixed costs of Appalachian Power that other ratepayers have absorbed since the Ravenswood plant closed in 2009.
Under a traditional rate, that cost would be Century's responsibility going forward if it restarted the smelter, according to the PSC.
The coal severance tax credit allows Appalachian Power to be paid for a portion of Century's power costs from coal company severance tax payments of as much as $19.4 million per year.
Century will be billed at the established minimum rate each month, according to the PSC's news release, but Century's payment will be based on the rate tied to the London Metal Exchange price of aluminum, "which is more reflective of the amounts that Century should be able to afford to pay at various aluminum prices," the news release states.
The difference from monthly billings at the London Metal Exchange rates and monthly billings at the established minimum rate will be recorded in what the PSC is calling a "tracking account."
So when the LME rate is lower than the established minimum rate, a negative amount will be recorded in that tracking account, along with any payments at the LME rate that are above the minimum rate, creating an excess.
The PSC's order also requires Century, at the corporate level, to secure the tracking account with a corporate guarantee, making it liable to Appalachian Power at the end of the special rate agreement, regardless of the Ravenswood's plant's corporate ownership.
At the end of this special rate agreement, if there is a positive balance in the tracking account because the cumulative LME rate billings are higher than the cumulative minimum billings, the PSC requires the first $200 million to be used to reduce the rates of Appalachian Power customers as a repayment of the fixed cost credits.
If the balance is more than $200 million, at the end of the special rate agreement, the extra will be split, with 25 percent of excess going to other Appalachian Power customers and 75 percent going to Century Aluminum.
"The Commission left open the possibility that if the positive balances in the tracking account had built up to very high levels before the end of the Special Rate Mechanism, it may consider an earlier use of the Excess Revenue accumulated in the tracking account," according to a news release from the PSC.
If the tracking account has a negative balance at the end of the special rate agreement, Century "or its parent corporation," will be obligated to pay the full balance to Appalachian Power, including "carrying charges accrued over the years," according to the PSC news release.
"This will occur only if the aggregate LME rate billings (and payments by Century) over the term of the Special Rate Mechanism do not equal the Minimum Rate billings," according to the news release from the PSC.
The PSC's approval of the special rate expires Dec. 31, 2012. If Century and Appalachian Power agree to the special rate, they must enter into a contract and file it with the commission; that contract will end Dec. 31, 2021, but could be extended for a full 10-year period from the signing of the contract.
Century has stated in the past that it would not be able to re-open the Ravenswood smelter unless it receives all of the terms of its proposal. This order from the commission does not meet that condition.
Century issued a statement Friday morning. Spokeswoman Lindsey Berryhill said Century's management team is still reviewing the order in detail.
"We will be prepared to issue a more comprehensive statement once we have a thorough and accurate understanding of the PSC's decision and how it impacts our restart efforts," Berryhill said in a statement. "In the meantime, we would like to thank the PSC for its diligence, hard work and expedited review of the case."
The order includes a section to discuss market options for Century, including the possibility of Century purchasing power from the open market, an option raised during the rate hearing. (Click here for previous coverage) The PSC notes that the option for Century to purchase power from the open market is not part of the current rate proceeding, but the PSC noted in the order that "we do not necessarily agree with the Century argument regarding the legal and regulatory barriers to that option."
"The Century argument on that basis looks only at deliveries in West Virginia and does not consider the options that are available to it in Ohio, where it had a service connection for over 50 years, and apparently still maintains that connection today," the PSC order reads.
The PSC Consumer Advocate Byron Harris said it's difficult to summarize the PSC order in just a few points, but he said the order tries to protect consumers through the corporate guarantee. He added, "The corporate guarantee is only as good as Century is as a corporation."
Harris also pointed out the $22.7 million deficit Century accumulated through its prior rate agreement will still fall to other ratepayers.
"It's like a mortgage, you can make the payments cheap on it, but at the end of the day, you'll still have to pay $22.7 million," Harris said. "It's certainly better than anything Century proposed, ... but it's not a complete protection for other customers, which is what we were after."
Appalachian Power Spokeswoman Jeri Matheney described the plan late Thursday afternoon as reasonable. She praised the PSC for weighing the requests of all the parties to the case.
"We hope this will allow Century to restart as soon as possible and bring back those jobs to Jackson County," Matheney said. "We are satisfied with the commission's approach, and we hope this will allow them to restart. The ball is now in Century's court."
Matheney also said she is "relieved the commission saw fit to remove the risk from Appalachian's customers and keep it where it belongs - on Century Aluminum."