By Bob Matyi
28 Jan 2014

West Virginia PSC may rule in spring on Felman Production's bid for lower power rate

West Virginia regulators will soon begin deciding whether to approve a special electricity rate US silicomanganese producer Felman Production says it needs to restart its 105,000 mt/year plant in New Haven.

The Public Service Commission is expected next week to be presented with the final set of reply briefs in the hotly contested case and a final order could come this spring, PSC spokeswoman Susan Small said on January 28.

The company's request is opposed by its utility, Appalachian Power, a unit of Columbus, Ohio-based American Electric Power, the PSC staff and the state consumer advocate.

The commission took about six weeks to rule on a similar rate relief case involving Century Aluminum in late 2012, she said.

In a January 24 filing, Felman refuted claims by several intervenors that it did not need the special rate that would cut the company's power costs by about $95 million/year. Felman idled silicomanganese production at its plant at the end of June. It originally filed for power rate relief on August 30. Details of Felman's power rate have not been made publicly available.

"All of the other parties contend that Felman Production has not demonstrated that it will be viable if the commission approves the special rate," it said. But that is not correct, it said, telling regulators that the special rate will make the difference in giving the company the confidence to resume production of silicomanganese by allowing it to "weather downturns in the commodity cycles."

The company said it provided the PSC with "reasonable evidence" that fundamentals of the silicomanganese market for a domestic producer are strong and that the US steel market, even in down times, will continue to need about 400,000 mt of silicomanganese annually, well above the 150,000 mt/year domestic production level that exists when Felman is operating.

Felman's domestic production represented about 25% of the market. However, its parent company Georgian American Alloys imports a large volume of silicomanganese into the US from Georgia. Combined, Felman and Georgian American Alloys were estimated by ferroalloys traders and suppliers to have had a market share of just over 50%.

If the special rate is approved, Felman said it would not object to making a $500,000 annual contribution to fixed costs, as some intervenors have recommended. But it opposes demands that Felman make an unspecified "substantial contribution" to fixed costs.

"Felman believes that $500,000 a year is a substantial amount," it said, adding that the special rate "is the minimum which it needs to justify a decision to restart SiMn production. The commission's approval of the special rate will enable Felman Production to restart and remain viable over the long term."

About 72 employees still work in the New Haven plant. If two of the plant's three silicomanganese furnaces are restarted, the plant's payroll will increase to 155 people, the company said. It conceivably could reach 200 employees if all three furnaces are operating.

Felman officials could not be reached for comment on January 28.

With the West Virginia plant still not producing, several large US steel mills, where Felman had been an incumbent long-term supplier, remain uncovered for first-half 2014 silicomanganese supplies, a situation exacerbated by a lack of import activity by traders, which has made the US market tight. This has forced some of the country's largest steelmakers onto the spot market for first-quarter supplies in January, helping to push prices up. US silicomanganese prices finished 2013 at 53-54 cents/lb, in-warehouse major US hubs, and have climbed steadily in January to 56.50-58 cents/lb. 

Recent inquiries from steel mills have attracted offers at above 60 cents/lb, according to market sources.