Noranda Aluminum Wants Electricity Rate Reduction

Noranda Aluminum is asking the Missouri Public Service Commission (PSC) for a cut in the electric rates Ameren Missouri charges them for power at Noranda’s smelter near New Madrid, Mo. The aluminum company also filed a complaint against Ameren estimating that the electricity company is overearning and therefore asking for the review of Ameren’s revenues.

In spring 2013, the electricity company Ameren disclosed that they earned $80 million more than authorized in 2012. Ameren is restricted in the amount of profit they can earn. That pushes Noranda to argue Ameren should reduce their rate for them.

One of Ameren’s largest customers, Noranda filed on February 13th a petition requesting the PSC to look at Ameren profits. Ameren is required to report details on their earnings to the PSC through a Surveillance Monitoring report but this document is not available to the public.

“We’ve provided testimony to the Public Service Commission that, giving current market condition, if we don’t get the rate reduction that we are seeking within the time frame we are seeking we would be required to reduce the workforce in New Madrid by 150 to 200 people,” said John Parker, vice president of communications and investor relations at Noranda.

Tennessee-based Noranda Aluminum is a major producer of aluminum in the United States. According to Parker, the company needs to have competitive power rates in order to be sustainable which they do not believe is the case right now.

But advocates with energy watchdog group Missourians for a Balance Energy Future are not convinced. Irl Scissors, executive director for the group, thinks it is up to the PSC to determine if Ameren is earning too much and believes that Noranda is trying to control Missouri's electricity rate. That, Scissors contends, is the PSC's job.

Scissors said Noranda already pays 60% less than the average Missouri consumer and has the lowest rate in the state.

“They have the cheapest rate of the service provider that provides them electricity and if it were to be any cheaper it would actually cost more to provide them electricity than it costs for the electricity,” Scissors says. 

He adds that what Noranda requires is basically a rate shift and that Missouri residents and small businesses would have to pay out of their pockets for Noranda’s reduction in rate. Consumers would have to pick up the difference and pay a 2% rate increase per year for the next 10 years.

According to a Missourians For A Balanced Energy Future press release, Noranda assured its Wall Street investors that their company is in no financial danger.

“It’s curious to me how a company that turns a profit in 2013, pays shareholders dividends, and then turns around and claims poverty to the PSC stating that they may have to close or lay off hundreds of workers if they don’t get a significant rate reduction in their electricity rate,” Scissors said.

John Parker does not agree with that assessment.

“We’ve been taking every possible action that we can take to reduce the cost it takes to produce valuable aluminum, and we’ve been successful at that,” said Parker.

But he added that those efforts have not been enough to offset the effects of high and uncompetitive power rates. The demand for aluminum is strong but aluminum prices continue to be depressed and this magnifies the need for competitive power costs in order for them to be sustainable.

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