KRC Expresses Concern With Bills Allowing Aluminum Smelters To Bypass Their Electric Generation Utility

KRC Expresses Concern With Bills Allowing Aluminum Smelters To Bypass Their Electric Generation Utility  Posted: February 15, 2013

Chairman Jim Gooch
House Natural Resources And
Environment Committee
Frankfort, Kentucky 40601

Hon. Tommy Thompson
House of Representatives
Frankfort, Kentucky 40601

All Members
House Natural Resources And
Environment Committee
Frankfort, Kentucky 40601

Re: HB 211

Dear Chairman Gooch, Representative Thompson, and Committee Members:

I?m writing to follow up on my February 13 letter to you concerning HB 211.

As you heard from the testimony from the representative of Big Rivers, the dispute between Century Aluminum and the Cooperative is not over whether market power can be purchased to serve Century’s load. The dispute is over the allocation of any additional costs that would be incurred in order to accommodate Century’s request while assuring that the reliability of the power system can be maintained. If Big Rivers/Kenergy purchases power from the market for Century, there will be new costs to the Cooperative and its other customers over and above those that would have been imposed if the facility closes. Those costs will be incurred to provide voltage support for the delivery of power from the market, including the upgrades on pollution control equipment needed to operate a higher-cost dispatch plant that would otherwise not be needed, and possibly other costs dictated by MISO.

Transferring these costs to other industrial and commercial customers in the Big Rivers system would be unfair, and could jeopardize the continued financial vitality of those entities over and above the requested 25% rate increase already requested in the pending PSC case. If the General Assembly intends to pass legislation in this area, rather than letting the two parties negotiate the terms of the new contract regarding the allocation of these additional incremental costs, I would urge that the Committee include language providing that “The large industrial consumer of electricity shall pay the incremental costs determined by the Public Service Commission to have been incurred by the retail electric supplier in order to accommodate the delivery of electricity purchased by the large industrial consumer of electricity from a person other than its retail electric supplier.” Failing this, HB 211 would shift those incremental costs to other customers, in effect requiring them to underwrite the continued presence of Century Aluminum, with no binding assurance that the company and these jobs will remain in Kentucky for any length of time.

KRC remains convinced that a legislative solution is not needed, and that instead the Governor should actively participate in discussions concerning the appropriate incentive package, including both traditional economic development tools and multi-county coal severance dollars, that could be applied to keep these companies competitive. I would expect that the incentives would include “clawback” provisions in the event that the commitments to remain in Kentucky are not honored.

Thanks in advance for your consideration of these concerns.

Cordially,


Tom FitzGerald
Director

cc. Sen. Joe Bowen

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