Ormet shutting down, CEO blasts PUCO
HANNIBAL – Mike Tanchuk blasted the Public Utilities Commission of Ohio Friday for not further reducing Ormet’s electric bills as he announced the company would cease all operations by this week.
Two days after the PUCO announced it would cut Ormet’s American Electric Power bills from $60 to $50 per megawatt-hour – rather than to $45.89 per megawatt-hour as Ormet requested – Tanchuk, Ormet president and chief executive officer, said the plant would shut down its remaining two potlines.
This move will cost about 750 workers, who were still employed Friday, their jobs. These cuts are in addition to the workers laid off previously as Ormet reduced production from six to two aluminum potlines. In total, roughly 1,000 jobs will be lost.
“The chairman and one of the commissioners went out of their way to insult Ormet’s efforts to reduce costs,” Tanchuk said in expressing frustration with the Wednesday comments made by PUCO Chairman Todd Snitchler and Commissioner Steven Lesser.
“The PUCO commissioners never mentioned in their comments that Ohio’s energy policy transition to market has massively increased energy costs and is misguided, with its first major casualty being Ormet,” Tanchuk said.
Ormet has been Ohio’s largest consumer of electricity.
In making their Wednesday decision, commissioners said they recognized Ormet’s economic importance to the region, but wanted to balance those interests with the concerns of local rate payers who would be subsidizing part of Ormet’s power costs with increases to their own bills.
Officials with AEP and the Ohio Consumers’ Counsel have 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.
During Wednesday’s PUCO meeting, Snitchler said the commission has approved a total of $346 million in financial support for Ormet over the past four years, calling this “extraordinary.”
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 this transaction required convincing the PUCO to allow Ormet to have lower AEP bills.
John Puskar, staff representative for the United Steelworkers at Ormet, said the stipulations for Wayzata to purchase Ormet included securing the lower AEP rates, securing a working agreement with the USW and moving the pension debt to the federal Pension Benefit Guaranty Corp.
The USW Local 5724 approved the new working agreement, while the PBGC will likely take over the pension debt. However, Tanchuk said the electricity rate of $50 per megawatt-hour is not low enough.
“It is just hard to say right now,” a frustrated Puskar said Friday. “The ball is still in Wayzata’s court, but we will just have to see what happens.”
Calls to Wayzata’s corporate offices seeking comment were not returned.
The commission Wednesday agreed to modify Ormet’s discounts so that AEP Ohio ratepayers would receive a refund if benchmark aluminum prices exceed Ormet’s break even level of $2,200 per ton. If aluminum rises above $2,500 a ton on the London Metal Exchange, Ormet will pay Ohio ratepayers at 108 percent of the rate.
The commission denied Ormet’s request to transition to retail choice for electricity purchases in 2014, ordering the company to honor its current contract with AEP through December 2018. Tanchuk had wanted Ormet to generate its own electricity by late 2015, via a planned natural gas power center.
U.S. Rep. Bill Johnson, R-Marietta, Ohio, said he was “deeply disappointed” to learn that Ormet would shutter operations next week.
“I’m disappointed that a short-term deal couldn’t be reached with the state of Ohio to allow Ormet to continue operations. Ormet has a strong, viable plan to produce its own energy from the natural gas production that we are seeing in eastern and southeastern Ohio – if only they had the support to get to that point,” Johnson said.