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Power costs, aluminum pricing sink Century plant

RAVENSWOOD, W.Va. — Claiming Century Aluminum exhausted all options to restart operations in Jackson County, a spokesman said the company ultimately had no choice but to scrap the longtime smelting operation six years after the factory was shuttered by the 2008 recession.

High energy costs and fluctuations in the aluminum market became pivotal factors in the company’s decision.

“When Century went off line, it’s electric bill was $108 million,” said Tom Heywood. “To bring it back on line, that cost jumped very significantly up into the $130- to $140-million range for just the standard tariff.”

Century was Appalachian Power’s biggest customer for years. The company and power provider held nearly non-stop communication seeking a rate agreement that would enable the company to become profitable and to guard against fluctuations in aluminum prices.

“What they were hoping for was an adjustable rate based on the price of aluminum,” said Jeri Matheney, spokesperson for Appalachian Power. “That was something we were willing to consider and in fact had worked with them in the past on such a rate. But now what they wanted was something that shifted costs to other customers and that was just not something we could agree to.”

Another change affected the dynamic of a potential restart: A pooling agreement involving all of the American Electric Power subsidiaries expired at the end of 2013. It was an agreement that enabled Appalachian Power to buy additional electricity to run the Ravenswood plant.

“When the pooling agreement ended, APPCO no longer had the ability to buy that power at the same rate from a sister company,” said Heywood. “Whether we came back in under a special rate or a standard rate tariff, it wouldn’t matter. Just firing up the plant would cause everybody else’s electric bill to go up a little bit. APPCO made it clear to us they were not in a position to support that.”

The company could have restarted operations as recently as March and still made a modest profit, Heywood said. But then China, which historically had not been a big exporter of aluminum, shifted strategy and flooded the U.S. market with lower-cost product.

“The straw that broke the camel’s back was the rapid collapse of aluminum prices in the last several months,” he said. “Now it would begin operating at a huge loss and we just didn’t think that was fair to all who worked too hard on this to say, ‘If you give us all of this, we don’t know when we can come back on line.'”

Added Matheney: “They hadn’t been operating for several years, so we had adjusted our forecast for how much power we’d need based on that. … It was one of our largest customers and we certainly wanted them back.”





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