March 11, 2013

Century Aluminum Wants Kentucky Lawmakers to Change Power Regulations

With margins plummeting in the aluminum industry, Century Aluminum (CENX) has gone to Kentucky lawmakers to request to be allowed to acquire power from more than one company in the state. Currently Kentucky state law requires all power consumers to buy from only one energy supplier.

Lawmakers in Kentucky are close to making a decision on whether or not to exempt Century Aluminum and other smelters in the state will be allowed to buy power on the open market.

It sounds like a no-brainer when you consider the rates in Kentucky are about 10 percent above the industry average 30 percent. Century's power costs in Kentucky are 40 percent of production costs, making them uncompetitive with rivals.

"We're losing money every month. What the bill would do is get me out from under that exclusive service contract," said Michael Early, Century's energy director.

Also affected by the change in regulations wold be Rio Tinto Alcan's Sebree plant.

As for Century's Hawesville smelter, the closure would result in the loss of 750 jobs and $800 million annually in state revenue.

The high-priced Big Rivers utility, which opposes the proposed legislation, saying it would push up rates for its other customers.

That's a weak argument when the utility would lose the business of Century Aluminum if it is forced to close the plant because of unsustainable operating costs.

Century Aluminum said if the costs of power aren't lowered, it will close the Hawesville plant in August.

This isn't a play, as other aluminum smelters have had to leave the U.S. because of slim margins and high production costs.

With Century committed to Kentucky, it's unthinkable that politicians in the state would balk at not empowering the company to buy power from elsewhere.

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