HomeGAA in the MediaNewsArchivePSC approves special rate plan for Felman Production's New Haven plant


The State Journal
April 7, 2014
By Linda Harris

PSC approves special rate plan for Felman Production's New Haven plant 

The state Public Service Commission has approved an electric rate discount of up to $9 million a year for Felman Production's silicomanganese plant in New Haven, leaving it to company officials now to decide if they can live with the terms.

The special rate plan approved by the West Virginia Public Service Commission will calculate the rate of discount each month based on the actual gross margin available in the SiMn market: the gross margin is calculated to be the difference between the market price of SiMn and the market price of the major raw materials that go into SiMn – manganese ore, coke and coal, the PSC noted in a release announcing its decision. 

The New Haven plant is powered by Appalachian Power Company. 

"Felman stated in testimony that when active, the plant contributes in excess of $187 million per year to the West Virginia economy and supports approximately 524 jobs in the state," the PSC statement noted. "The plant has not however, been profitable since at least 2010, was shut down in July 2013 and will not reopen unless Felman is granted a special rate for electricity. When operational, Felman's regular electric rate resulted in a $9.5 million annual contribution toward APCo's fixed costs, such as the costs of owning and maintaining its generation, transmission and distribution lines, and general administrative expenses. During the period while Felman is non-operational those fixed costs must be borne by other customers.Giving Felman a maximum annual discount of $9 million assures that Felman pays at least $500,000 per year toward APCo's fixed costs." 

Felman CEO Mordechai "Motti" Korf said under the plan the company will receive a discount off its electricity costs when the ferroalloy market is down and pay a premium when times are good. 

"While we did not get everything we requested from the PSC, we are very pleased with the ruling," Korf said. "We believe this order provides an important step in making Felman a viable producer able to weather the ups and downs of the ferroalloy market long term. We thank the United Steelworkers Local Union 5171, representing workers at Felman, which strongly supported the company when it filed its petition with the PSC last August. Members of Local 5171 will vote next week on modifications to the current collective bargaining agreement with the company, which, if passed, will have the effect of further strengthening Felman's long term viability." 

According to the Order, should Felman choose to accept the approved special rate and enter into a contract with Appalachian Power Company ("APCo"), the contract must be filed with the PSC by June 30, 2014. Any restart at Felman would take several weeks after entering into a contract with APCo. 

In its order the PSC set a target gross margin at which Felman would simply pay its normal rate for electricity: In months where the actual gross margin is less than the target, Felman would qualify for the discounted electric rates; when the actual gross margin is above the target, the company would pay a premium above its regular rate. 

The commission specified there was to be no cap on the premium Felman would be required to pay as long as there was a cumulative balance of the discounts taken in the past. Once all the past discounts have been paid back by Felman through the premiums, the maximum premium it would have to pay would be $4 million. 

Felman does not want that target rate and other sensitive information released. The PSC, however, deferred ruling on a protective order the company had requested to prevent the data and models from becoming part of the public domain. 

But, as an inducement to ensure Felman operates for at least five years after accepting the special rate plan, the PSC would require that a portion of the discounts given in each of the first five years would be subject to recapture until the end of the fifth year. 

The New Haven plant has three furnaces, all of which have been idled since July. 

Felman's parent company, Georgian American Alloys, has said it wants to resume production at the plant, but only if it makes economic sense. CFO Barry Nuss had said since acquiring the plant out of bankruptcy in 2007 in December GAA had invested millions of dollars in upgrades that improved operations but not their bottom line. 

At peak operations in 2012 some 260 people were employed at the New Haven plant; by the time the furnaces were idled in July, only about 205 people were on the job. The plant's published capacity is 105,000 metric tons per year. 

The West Virginia Legislature in 2012 passed legislation authorizing the PSC to consider allowing a special rate for electricity for energy-intensive industrial customers under certain circumstances.