Update:  This week, the PUCO issued an Opinion and Order approving a modified unique arrangement for Ormet.  In so doing, the PUCO recognized Ormet’s lengthy history with AEP-Ohio evolving from Ormet’s status as a customer of AEP-Ohio to becoming a customer of South Central Power to pay lower rates, only to return to AEP-Ohio through the approval of the current unique arrangement.

Since Ormet’s request, if approved in its entirety, would have imposed an excessive burden on AEP-Ohio’s other customers who have already expended $218 million to fund Ormet’s discount, the PUCO found that Ormet’s request should be approved with the following modifications:

• Ormet’s monthly billed rate should not exceed a fixed generation and fuel rate cap of $50.00/MWh, plus all applicable riders (excluding the FAC), distribution charges (excluding the discount) beginning with the October 2013 bill through 2018;
• The remaining maximum rate discount available:
  • 2013   $66 million
  • 2014   $54 million
  • 2015     $0 million
  • 2016     $0 million
  • 2017     $0 million
  • 2018     $0 million

for a total of $294 million maximum rate discount from 2010 through 2018; and

• The target LME price for aluminum that would trigger a premium payment by Ormet is lowered from the current 2013 target price of $2,805 / tonne to $2,650 / tonne and $2,490 / tonne for 2014 and the first five months of 2015.

The PUCO also:

• denied the request for permission to shop for an alternative supplier;
• denied the request to modify the term of the unique arrangement;
• denied the request for additional ratepayer funding in the form of an extended monthly discount of $4.5 million for January – May of 2015;
• denied the request to amend the payment schedule for the payments deferred in 2012, finding the fixed generation and fuel rate cap along with the acceleration of the remaining discounts in 2013 and 2014 strikes a balance among the interests of Ormet and AEP-Ohio’s other ratepayers; and
• required Ormet, through the remainder of the unique arrangement, to reimburse customers for the discounts that it has received based upon the lowered target LME price of aluminum; therefore, when the LME price is greater than Ormet’s LME break-even price of $2,200 / tonne but not more than $300 / tonne above the LME break-even price, Ormet should be required to pay 104% of AEP-Ohio’s tariff rate, and when the LME price is greater than $300 / tonne above Ormet’s LME break-even price, Ormet should be required to pay 108% of AEP-Ohio’s tariff rate.

Finally in granting Ormet’s request, the PUCO:

• authorized Ormet to assign its interest in the amended unique arrangement to Smelter;
• authorized AEP-Ohio to collect from ratepayers the full $66 million in 2013 even though the maximum amount of the delta revenue was set at $54 million; and
• directed Ormet and AEP-Ohio to file an executed power agreement which conforms to the modifications set forth by the PUCO.

By approving a modification to the unique arrangement, the PUCO stated that it expects Ormet to maintain an employment level of 650 full-time employees throughout the term of the unique arrangement.

Applications for rehearing are due November 1, 2013.  We will continue to monitor this proceeding and provide updates accordingly.