PSC Comes Up with Yet Another Century Plan

I have been following the Century Aluminum case at the WV PSC, because it illustrates so clearly how WV’s dysfunctional electricity system is damaging our state: out of state corporations looking for handouts from rate payers and tax payers, and a PSC that always ends up putting corporate interests above the interests of West Virginians.

The promised PSC order concerning the Commission’s ruling on the various plans for the fate of Century’s past debts to APCo and future rate structure was released yesterday.  I have read accounts in the Charleston Gazette, The State Journal and the Charleston Daily Mail.  The story by Jared Hunt and Ry Rivard in the Daily Mail is the clearest of the three.

There were three different plans offered during the Century case at the PSC.  One from the WV Consumer Advocate Division of the PSC, one from APCo and one from Century.  Century insisted that if the PSC did not order their plan in its entirety, Century would walk and not reopen its smelter plant in Ravenswood.  Well, the PSC did not give Century what it wanted, which was for APCo’s other rate payers to bear all the burden of changes in the market price of aluminum for the next ten years.

The PSC’s recent order allows Century to pay a set amount for electricity, but calls for a reckoning at the end of the order’s ten year term which would force Century to make up any underpayment over that period.  While reporters have focused on this part of the deal, the PSC also approved two other legs of the plan which are paid for by all West Virginia tax payers and APCo’s rate payers.

The first of these aspects of the plan was approved by the Legislature in the last session.  Legislators gave away $20 million in severance tax credits to the coal industry which will be used by APCo to give Century discounts on its electric bills.  That $20 million giveaway will mean that payments from severance taxes into the state’s general revenue fund will fall $20 million short and will have to be made up with spending cuts or other tax increases.  The PSC didn’t have any say in this decision, because it was an act of the Legislature, and had to approve this boondoggle in yesterday’s order.

The PSC also approved a new giveaway to Century that Consumer Advocate had called “unprecedented.” When Century shut down its Ravenswood smelter in 2009, it walked away owing APCo about $22.7 million on an unpaid electric bill.  The new PSC order forces APCo’s other rate payers to pay off that debt.  So if you are an APCo electric customer, you will be paying Century’s past bad electric bill debt.

The press is concentrating on the PSC’s plan about Century’s future electric bills, and claiming that the PSC protects rate payers from Century’s greed.  I don’t see how sticking APCo rate payers with $22.7 million in rate increases is protecting APCo rate payers.

Of course, the Consumer Advocate points out in the Daily Mail story that the PSC’s idea of having Century sign an IOU over to APCo isn’t really worth much in today’s world of corporate ethics where corporations file bankruptcy regularly to stick their creditors with their bad debts.

Hunt and Rivard also point out another aspect of the situation that is not directly covered by the PSC order, because it is built into WV’s rate system.  When Century closed in 2009, it was using more than 13% of the electricity that APCo sold.  Under WV’s regulatory system, APCo recovers all of its overhead and capital costs from its existing rate payers, no matter how much electricity it sells.  When Century closed, the overhead in APCo’s rate base that Century was no longer paying, was shifted to all of APCo’s other rate payers.  In a past deal, APCo agreed to absorb some of that cost, but it left rate payers still paying more than $17 million per year to cover APCo’s lost revenue from Century.

As Consumer Advocate Harris pointed out in the Daily Mail story, if Century accepts the new PSC plan, at least Century will begin to pay its share of APCo’s overhead and will relieve rate payers of that burden.

APCo is not finished analyzing the PSC’s order, but their media person is making positive noises about it.  So now the ball is in Century’s court.  During the PSC case, they had a take it or leave it attitude.  The PSC’s plan is not what they said they had to have.  Will Century walk away from West Virginia?

There are two other things about the Century fiasco that no reporters ever mention in their stories:

  1. Before any of the recent special favors, Century was already getting the benefit of the PSC’s heavily discounted industrial electric rate that already places extra burdens on residential customers.  The cheap bulk rates also give industrial customers extra incentives to waste electricity because their power is so cheap, usually about one third to one half of what residential customers pay.
  2. And speaking of waste, why did no one in the PSC proceedings, let alone the PSC itself, require Century to provide a plan to minimize waste in its electricity use by presenting an energy efficiency and waste heat recovery program?  Why didn’t the Legislature and the PSC insure that Century’s future electric bills were as low as possible to minimize the burdens on all of the rest of us?  I mean, its not so hard to figure out.  Denmark now leads the world in combined heat and power technology because they have been requiring it now for 40 years.

The PSC’s failure to require even minimal responsibility for reducing its own power use is the 800 pound gorilla in the room in the Century case.  Thinking about electricity costs is so myopic in WV that no one sees this obvious first step that should have been taken by the PSC.

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