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Aluminum Producer Says $1M Seams Elimination Charge May Put it Out of Business

Aluminum Producer Says $1M Seams Elimination Charge May Put it Out of Business

A West Virginia aluminum producer last week said it may be forced to close its doors and lay off workers if FERC does not grant it relief from a seams elimination charge adjustment (SECA).

Ormet subsidiary Ormet Primary, which owns a large aluminum reduction facility in Hannibal, OH, is facing the prospect of being charged almost $1 million per month -- 26% of all SECA charges attributable to the American Electric Power (AEP) zone -- even though Ormet's current power load [200 MW] is less than 1% of the 2003 peak load in the entire AEP zone, the company told FERC [ER05-6 et al]. The first payment is due Jan. 20, 2005.

The aluminum producer has asked the Federal Energy Regulatory Commission to either eliminate the subzones for collection of the SECA within the AEP zone, or to allow Ormet to pay a smaller rate subject to refund or surcharge.

Ormet already is in Chapter 11 bankruptcy and is confronting a labor dispute at its Hannibal plant, and a charge of this immensity could break the company, the Wheeling, WV-based producer said.

"A charge of this magnitude, coupled with current market prices for electricity, will force Omet Primary to close its reduction plant and may force [sister company] Ormet Mills Products to close its rolling mill, causing 1,900 workers to be unemployed, 5,100 people to lose health care benefits and an additional 4,800 retirees and their dependents to either lose or face reduced health benefits," Ormet said.

Although the charge would be subject to refund or surcharge, Ormet noted it cannot continue to operate either the reduction facility or the rolling mill if it is required to pay $1 million per month.

If the charge is imposed, Ormet Primary would have to shut down the reduction facility within 30 days and Ormet Mill Products may close its rolling mill soon after, it said.

Ormet has been in bankruptcy since January of this year. Both Ormet Mill Products and Ormet Primary have been able to continue to operate their facilities during this period. On Dec. 15, the U.S. Bankruptcy Court for the Southern District of Ohio confirmed the company's plan of reorganization, paving the way for Ormet to complete its financial reorganization and emerge from Chapter 11 protection.

"The business forecast which was used as the basis for Ormet's plan of reorganization made provisions for increased power costs over the next couple of years; however, it did not anticipate a SECA charge of almost $1 million per month through March 31, 2006 for intra-PJM and inter-RTO seams elimination, and the plan cannot withstand a charge of that magnitude," Ormet said.

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