Charleston Daily Mail
June 22, 2014
By Jared Hunt

Felman rate plan almost complete

Appalachian Power and Felman Production plan to have a new power rate agreement filed with the state Public Service Commission by the end of the month.

The new agreement will be crafted using terms laid out by commissioners earlier this year when they approved a rate scheme designed to help the idled manufacturer restart operations at its New Haven plant.

Felman shuttered most operations at its New Haven plant last June, citing rising production costs and poor market conditions. More than 140 employees were laid off during the process.

The company is one of two U.S. producers of silicomanganese, a deoxidizer that allows steel companies to produce a purer type of steel. It’s made by taking three raw ingredients — manganese ore, coke and coal — and heating them to 3,000 degrees Fahrenheit in an electric arc furnace.

In August, Felman submitted an application to the PSC for approval of a 10-year special power rate contract to help restart the plant.

Electricity represents 20 percent of production costs, and the company’s power rate had risen nearly 45 percent since 2008. Felman said a more favorable power rate would allow it to compete globally.

In its original proposal, the company asked the PSC to approve up to $9.5 million in annual discounts, which would fluctuate depending on the company’s materials costs.

The $9.5 million figure came from the amount Felman was paying each year to cover Appalachian Power’s fixed costs of providing power. The company said that if the plant were to shut down permanently, those costs would be shifted to other ratepayers, so their plan left consumers no worse off than if the plant shut down forever.

In April, the PSC approved a modified version of the company’s proposal, one that would provide the company with up to $9 million in annual discounts on its power bill. Felman’s rates would be set on a monthly basis. In months where the company’s material prices are less than a set target, Felman gets discounts. In months where prices are more than targets, Felman will pay a premium.

Commissioners ordered Felman and Appalachian Power to work up a revision to the company’s current special power contract using the approved rate scheme and turn it in to the PSC for review by June 30.

Last month, Appalachian Power filed a request with the PSC asking for clarification about one aspect of how the discount plan will work and if it depended on how much power the plant consumed in a given year. It seemed at the time the company and Felman disagreed about how that particular aspect of the plan will work.

However, on June 13, APCo filed an update with the PSC saying that after reviewing additional materials, the companies had “no fundamental differences” on the matter.

“APCo’s negotiations with Felman have advanced since APCo filed its Petition for Clarification,” the power company wrote. “At this time, it appears to APCo that APCo and Felman are nearing agreement on the terms of an addendum to Felman’s existing special contract.”

The company expects to have an initial agreement to present to the PSC by next Monday. It would follow up with a new, comprehensive contract filed with the PSC later this year.