Century Wants Taxpayers to Buy Coal and APCo Rate Payers to Provide Free Power

In today’s Charleston Daily Mail, reporter Jared Hunt did a good job picking apart AEP’s response to Century Aluminum’s plan to have WV pay its electric bills.

Here’s the summary of the current situation that Hunt took from the AEP response recently filed at the WV PSC.

In the last legislative session, the WV Legislature gave away $20 million per year of coal severance taxes to WV coal companies that sell coal to APCo as part of a subsidy deal for Century.  That severance tax revenue would otherwise have been distributed to counties for public services.  Instead, that money would go to Century in the form of reduced electric bills and to AEP in the form of lower fuel costs.

AEP claims that Century wants to peg its electric rates to the price of aluminum on the London Metals Exchange, with no minimum rate.  What does the no minimum rate mean?

The power company did the math on what consumers would pay if aluminum remained at last week’s price of $1,957 per ton.

At that price, other power customers would have to chip in $61.5 million per year to keep the company afloat.

“At that price level for aluminum, the average residential ratepayer would be facing a $12.65 increase in his monthly electric bill to support the special rate proposed by Century,” Appalachian Power attorneys said in the company’s filing.

Attorneys noted that if the price fell to about $1,700 per ton, Century would pay nothing for its power. Other customers would have to pay $126.7 million in total, with residential customers paying an average $17.82 more per month.

They also said Century’s proposed rate plan doesn’t address what would happen if the price fell far below $1,700 per ton.

“If the price of aluminum fell below $1,700, Century would need, in addition to ‘free’ electricity, additional funds from somewhere to defray its production costs and guaranteed profit margin,” company attorneys wrote.

So, if the price of aluminum falls below $1700 per ton, APCo’s rate payers would simply be paying Century a bonus to stay in business.

On top of this corporate welfare, Century wants to continue having rate payers pay for its unpaid electric bills that it owed APCo when the Ravenswood plant closed in 2009.

Century’s audacity is stunning.  Of course, it is ironic that AEP’s lawyers are the people objecting to Century’s subsidies.  Those same lawyers are currently working on AEP’s own scheme to have APCo rate payers pay for the company’s coal bill from 2008 using WV PSC guaranteed bonds.  Coal-fired electricity is getting very, very expensive for AEP’s WV customers.

If these tax payer and rate payer subsidies are what it takes to keep burning coal in WV to provide electricity for power intensive manufacturing, it looks like we have seen the end of an era in our state.  WV is no longer the “cheap energy” state, if it ever was.

3 thoughts on “Century Wants Taxpayers to Buy Coal and APCo Rate Payers to Provide Free Power

  1. Ironically, the 2010 WV PSC rate case contemplated that when Century Aluminum re-opened its smelter, that the economy of scale created by that added large volume electricity user would allow residential electrcal rates to be LOWERED. The concept of progressive economy of scale rate making based on industrial economic recovery is now being turned on its regressive head.

    • Frank,

      Thanks for your insightful comment. This is a perfect illustration of the whole new world we inhabit. For decades in the US, electricity demand rose dramatically. The rate of growth of demand began to fall around 1970. In 2006, electrical demand fell for the first time, and has remained flat ever since. The economy of scale idea is based on ever increasing demand, which is now a thing of the past.

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