AEP earns $338M while Ormet struggles
MOUNDSVILLE – As Ormet Corp. nears a potential shutdown and liquidation because of an ongoing rate dispute with American Electric Power, the electricity company earned $338 million from April through June.
“We are executing well on our earnings growth strategy,” said Nicholas K. Akins, AEP president and chief executive officer. “We continue to successfully direct significant investments to our regulated infrastructure for the benefit of our customers.
“We are on track to keep our operations and maintenance expenses, net of offsets, at essentially the same level as last year,” he added.
The situation at Ormet is much different, however, as the aluminum producer is reducing its operations to one-third of capacity by running just two of its six potlines. President and Chief Executive Officer Mike Tanchuk said this is because Ormet must save cash after the Public Utilities Commission of Ohio failed to grant the company’s request for emergency relief in its electricity rate dispute with AEP.
AEP could raise Ormet’s bills to $62.83 per megawatt hour, according to Tanchuk. The rate was just $39.66 per megawatt hour when the companies reached their power agreement in 2009, he said.
Wednesday, the PUCO ruled against Ormet’s emergency relief request, instead deciding to hear the case on Aug. 27. Ormet officials hoped to gain the lower AEP rate relief so they could complete the $221 million sale to Wayzata Investment Partners as a means of emerging from the bankruptcy case it filed in February.
“Ormet must receive the relief requested to continue operations and build a future for our employees and community,” Tanchuk said.
On Thursday, United Steelworkers Staff Representative John Puskar, whose coverage area includes Ormet, said Ohio Gov. John Kasich should take a more active role in helping find a solution to Ormet’s problems. Friday, state Sen. Lou Gentile, D-Steubenville, and Rep. Jack Cera, D-Bellaire, echoed Puskar’s frustrations.
“Ormet is asking for temporary relief to save and protect employees, and the PUCO is fully aware that Ormet’s ability to keep operating was contingent upon the approval of an adjusted electricity price,” Gentile said. “Ohio’s utility regulators had the opportunity to keep 1,000 people off of unemployment in Ohio. Now, dedicated and longstanding employees are faced with uncertainty about their pensions and future employment.”
“Ratepayers will be hit with additional costs whether Ormet is operating or not since they are such a large user of power and a huge part of AEP’s rate base,” Cera said. “We believe the governor’s office can work to expedite a decision more promptly than the end of August to help the state of Ohio remain competitive in job growth and retention.”
However, Kasich spokeswoman Connie Wehrkamp said the administration has allowed Ormet to “receive $221 million in subsidies from other electricity customers.”
“We’ll continue to work with the company to provide additional appropriate help, and also work with employees to ensure they get the assistance they need going forward,” she added.
Despite earning the $338 million during the second quarter of 2013, AEP’s profits are actually down from the $362 million the company collected during the same period in 2012. Akins said some of the profit decline is due to “lagging industrial demand.”