Beshear: Compromise is needed in smelter negotiations
Feb 22, 2013 (Messenger-Inquirer - McClatchy-Tribune Information Services via COMTEX) --
As negotiations continue between Big Rivers Electric Corp., Kenergy and Century Aluminum to reach terms that would allow the Hawesville smelter to purchase electricity on the open market and stay open, Gov. Steve Beshear has re-entered the fray, urging the presidents of Big Rivers and Century to find a compromise that will end what he called a crisis.
Noting that his administration has been working with both companies for almost two years to find a resolution, Beshear, in a letter dated Wednesday, called on Mark Bailey, president and CEO of Big Rivers, and Michael Bless, president and CEO of Century, to find a solution to save "thousands of Kentucky jobs and bring peace of mind to thousands of Kentucky ratepayers."
"I urge both Big Rivers Electric Corporation and Century Aluminum to craft a framework of compromise that will end the crisis of confidence in the security of affordable electricity and of continued employment that has been communicated to me from hundreds of phone calls, letters, emails and faxes from ratepayers, employees and families," Beshear wrote.
Bills currently before the Kentucky General Assembly addressing the situation are "a political solution to a business problem," according to the governor. "I urge you both to take responsibility and immediate action and come together to find a reasonable solution ...," Beshear said.
Marty Littrell, director of communications and community relations at Big Rivers, said the sides have been meeting and the utility agrees with Beshear.
"Big Rivers is supportive of Gov. Steve Beshear's letter," Littrell said. "We believe it's a private business negotiation, and there is no need for a legislative remedy. Actually, Big Rivers and its members have been supportive all along in negotiations with Century to permit them to buy power on the market. Big Rivers and Kenergy have been working diligently and in "good faith" with Century staff since October of 2012 to allow them to purchase power from the open market."
Littrell said Big Rivers is asking Century to pay for costs the utility will incur as a result of the smelter buying power from the wholesale market.
"In addition, yesterday, only a couple of hours after receiving the governor's letter, Mark Bailey sent an email to Century's president/CEO committing to successfully continuing negotiations in a timely manner," Littrell said. "We informed Century that Big Rivers is willing to meet anywhere or anytime to advance negotiations to resolve this matter. We met with Century every day this week. We are actively analyzing the most recent requests made by Century to make sure it doesn't create negative outcomes for Big Rivers and our members. We are responding as quickly as we can to all issues and vow to never stop positive discussions. We are confident as long as both parties keep working in good faith, that we'll soon come to a successful outcome."
A Century spokesman said it was the company's policy not to comment on active negotiations.
Early in February, identical bills were introduced in the state House of Representatives and Senate aimed at retaining jobs at aluminum smelters in the Owensboro region. They were sponsored by Sen. Joe Bowen, an Owensboro Republican, and Rep. Tommy Thompson, a Philpot Democrat, as Senate Bill 71 and House Bill 211. Bowen said the changes to state law included in the bills would allow Century Aluminum to purchase electricity on the open wholesale electricity market, something it is not allowed to do now.
Thursday, Thompson's bill received a passing vote in the House Natural Resources and Environment Committee and now heads to the full House.
Getting the bill passed in committee was good news, because it means the effort to resolve the issues are following two paths, Thompson said.
"There's a lot at stake for everybody, and we just want the parties to negotiate genuinely and fairly," Thompson said. "This doesn't stop negotiations from going forward. I hope the negotiation paths works."
Thompson said he had heard that the negotiations were progressing positively between Big Rivers, Kenergy and Century. He said he did not know when the full House might take up the bill. "We've only got 10 more business days to consider bills," he said.
Last August, Century gave notice that it intends to shut down the Hawesville aluminum smelter unless the price of metal goes up and/or its electricity rates go down. The company terminated its power supply contract with Big Rivers Electric Corp. effective in August of this year. The plant uses about 39 percent of the power generated by Big Rivers. Big Rivers estimates it will need to recover $74 million per year with the loss of its largest customer.
Subsequently, Big Rivers filed for a rate increase, which would cause the average residential Kenergy cooperative member's monthly bill to go up by about $24 per month, to offset the jump in rates. Big Rivers filed with the Kentucky Public Service Commission, which has to approve the rate increase, in mid-January.
The bills filed by Thompson and Bowen remove Big Rivers' exclusive right to furnish power to the plant and allow Century to purchase power from any supplier, Bowen said, and it also requires that the local electric supplier continue to maintain and provide transmission and distribution facilities to the plant.
Kenergy President Greg Starheim said the cooperative is working on an agreement to supply Century with power sourced from the open market. The bills sponsored by Thompson and Bowen and co-sponsored by all other local and area legislators "circumvents" Kenergy's negotiations with Century, Starheim said.
Thompson described the bills as stop-gap, optional measures in case Century, Big Rivers and Kenergy ultimately fail to reach a resolution to keep the smelters operating.
Two weeks ago, Sebree Works Aluminum Smelter/Rio Tinto Alcan -- Kentucky's other primary aluminum smelter -- gave notice to Big Rivers Electric Corp. that it will end its power contract in 12 months, following the path of Century Aluminum.
Steve Vied, 691-7297, firstname.lastname@example.org
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