Ormet, AEP Clash At Capital

COLUMBUS, Ohio – Mike Tanchuk wants Ormet Corp. to generate its own electricity by late 2015 via a planned natural gas power center, but he said the bankrupt aluminum producer needs a break on American Electric Power rates until then.

However, officials with AEP and the Ohio Consumers’ Counsel said granting Ormet additional power discounts could result in higher rates for about 1.4 million customers across the Buckeye State, many of whom live hundreds of miles away from the Hannibal facility. The counsel also believes because Ormet employs many West Virginia residents, the aluminum company should also seek support from Mountain State leaders.

All of these matters and more came to the forefront Tuesday as Ormet, AEP and others voiced their concerns during a special hearing at the Public Utilities Commission of Ohio office in Columbus. The session was not an actual meeting of the commission, as Attorney Examiner Sarah Parrot officiated the session that saw five witnesses testify on behalf of Ormet.

Testimony is slated to continue today, but Tanchuk, Ormet president and chief executive officer, said he does not anticipate the commission making any ruling on the matter until October. He hopes Commissioners Todd Snitchler, Steven Lesser, Lynn Slaby, M. Beth Trombold and Asim Z. Haque will review the testimony and allow Ormet to receive power discounts now so that it can stay in business.

“There is no alternative. This is a life or death situation for us,” Tanchuk said following the Tuesday meeting. “If we cannot get this discount, we will be forced to liquidate.”

In February, Ormet filed for bankruptcy in U.S. District Court in Delaware. The company later announced a planned $221 million sale to Minnesota-based Wayzata, but emphasized the transaction required convincing the PUCO to allow Ormet to have lower AEP bills until it can begin generating its own power.

Tuesday, attorneys representing AEP pointed out that Ormet posted an $82 million net loss so far this year and wondered how the aluminum company could stay in business over the long term.

“We have reduced our operating costs dramatically over the past year,” Tanchuk responded. “We have projections that show us returning to profitability.”

When asked if he had contacted West Virginia officials for help, Tanchuk said he had received some feedback from Gov. Earl Ray Tomblin but had not gotten any commitment for assistance.

John Puskar, staff representative for the United Steelworkers, attended the Tuesday hearing with other union members. He said there are about 600 employees working at the plant now that it has reduced operations to two of its six potlines. Ormet recently filed a Worker Adjustment and Retraining Notification Act notice in preparation for a total shutdown.

“It is all about the (London Metal Exchange) price for aluminum and the rates for electricity,” he said. “The price of aluminum is down, so you have to make up for it.”

Tom Byers, president of USW Local 5724 at Ormet, said he presented a petition of nearly 7,000 signatures to the commission expressing support for the company.

Paul A. Coomes, a professor of economics at the University of Louisville, said Ormet’s impact reaches far beyond those working for the company.

“People don’t go to Monroe County from Pittsburgh to get a haircut,” he said. “The money flows in because the product (aluminum) is sold throughout the region.”

Coomes said the average annual salary of Ormet workers is $61,000. However, this figure is based on a model that Maureen Grady, representing the Consumers’ Counsel, said does not account for salaries going to out-of-state residents.

Also testifying on behalf of Ormet were Dave McCall, District 1 director for the United Steelworkers, and Mark Thompson of Wayzata investments.

In answering a question about the environmental impact Ormet’s planned natural gas power center will have, Thompson said, “There is not a lot of habitat on the site, other than our employees.”

Tad Berger, also representing the Consumers’ Counsel, asked James Burns Riley, chief financial officer for Ormet, if he expected that AEP would seek to raise power rates on other customers to compensate for losing Ormet as a customer if it begins producing its own electricity in 2015. Riley said he was “not qualified” to speculate about AEP’s future business plans.