Gallipolis Daily Tribune
April 3, 2014
By Beth Sergent

Felman plant receives favorable PSC ruling 

NEW HAVEN — A collective sigh of relief could be heard from the manufacturing sector of Mason County on Thursday after Felman Production received a favorable ruling from the Public Service Commission of West Virginia.

Without the ruling, Felman Production officials had said its New Haven plant, which manufactures silicomanganese (SiMn), would close, taking hundreds of jobs, many filled by the United Steelworkers, with it. 

“This is a win win for Felman and the people who work there,” Mason County Commission President Rick Handley said. 

Handley provided testimony to the PSC in support of Felman’s proposal to consider being given a special rate for electricity as provided under legislation passed by the West Virginia Legislature in 2012. 

The legislation is for special rates for energy-intensive consumers under certain circumstances. 

“This is some positive news we’ve need in Mason County and not just because of the tax income,” Handley said. “It’s great news for people who work there and the communities in the Bend Area.” 

The PSC released a statement summarizing the order that was posted in its entirely on its website. The statement says the special rate plan approved on Thursday would give Felman a discount up to $9 million per year off its full electricity rate. The rate of the discount Felman could receive would be calculated 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 plan satisfies the policy goals of the Legislature, addresses the concerns of Felman regarding the reopening of its plant, balances the interests of Appalachian Power Company, APCo’s present and future customers and the state’s economy, and was designed not to cause an additional financial burden on other APCo customers, including residential customers,” according to the PSC release. 

Felman Production was contacted about the news with spokesperson John McKenna saying the company would be sending out a statement as soon as possible, though it would likely not be ready by press time on Thursday as the news continued to break. It’s not known if Felman will agree to the specifics of the order and approved rate. If so, APCo and Felman are to enter into a contract, which is to be filed with the PSC by June 30. If the agreement is entered into, it’s not yet known how soon the plant can become fully operational again. 

In its official testimony to the PSC, Felman stated 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. Testimony went on to say the plant has not been profitable since at least 2010, was shut down in July 2013 and would not reopen unless Felman was 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, according to the PSC release detailing the testimony. 

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. 

In its order, the PSC set a target gross margin at which Felman would simply pay its normal rate for electricity. In a month where the actual gross margin is less than the target, Felman would qualify for a discount off its electric rates. In months when the actual gross margin is above the target, Felman would pay a premium above its regular rate. The PSC specified there was to be no maximum 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 cumulative premium that Felman must pay will be capped at $4 million. 

According to the PSC, Felman also has requested a protective order to prevent public release of certain data and models filed under seal with the PSC. That data includes the target gross margin. In Thursday’s order, the PSC deferred ruling on that protective order. 

As an inducement to have Felman operate for at least five years after accepting the special rate plan, the PSC plan requires that a portion of the discounts given in each of the first five years is subject to recapture until the end of the fifth year. 

A copy of the PSC order can be accessed on the PSC’s website, by referencing Case No. 13-1325-E-PC.