Missouri regulators this week unanimously denied a complaint from Noranda Aluminum seeking lower electric rates from Ameren Missouri.
The Missouri Public Service Commission's five members voted against Noranda on 1 October, saying the producer had failed to prove the utility's rates were unfair.
The aluminium producer and 37 individual customers filed the complaint in February, saying that Ameren Missouri's quarterly surveillance reports showed it was earning more than its allowed return. The complainants asked the commission to lower the utility's rates.
But "adjusting rates in this case without taking into account known ongoing and future costs would be contrary to sound ratemaking principles," the commission said.
The commission said the complaint did not take into account costs Ameren has already incurred this year for ongoing capital projects and solar rebate payments. Electric rates are meant to be "forward-looking," meaning that while revenues in a given month may exceed expenses, this should "even out over time," the commission said.
Ameren is in fact looking to raise rates because of increased expenses. It filed a rate case at the commission on 3 July seeking a nearly 10pc rate hike, in part because of $97mn/yr in capital spending and $34mn/yr in solar rebates to customers, as well as $127mn/yr in higher fuel costs. That case will likely not be decided until spring of next year.
The commission had already in August denied a request from Noranda to lower rates for its smelter in New Madrid. The company argued in that complaint that weak aluminium pricing would force it to shut if it could not get further rate subsidies. It said that although the proposal would raise rates for other customers, the area would be better off if it does not lose Noranda's 480MW of power demand and almost 900 jobs. But this argument did not sway the commission.
Noranda was seeking a $30/MWh rate but the commission found that it cost $31.50/MWh for the utility to supply it. Such a rate would have given the producer the lowest production costs of any US smelter, the commission said.
Ameren argued that Noranda's testimony ignored the impact of potentially higher aluminium prices on Noranda's need for rate relief. Aluminium prices have risen on the London Metal Exchange (LME) over the year from below $1,700/t to a peak of around $2,100/t at the end of August. They have eased since then but are still relatively favourable to producers when factoring in record-high premiums for physical metal in the US.
But Noranda is not giving up, planning to "vigorously pursue" a lower rate during the ongoing Ameren rate case. Even though LME prices and premiums have risen, "an uncompetitive, unaffordable power rate is a fatal disease for any aluminium smelter," Noranda said. "Short-term changes such as higher aluminium prices may suppress the symptoms for a time, but they do not change the seriousness of the underlying disease."
The company plans to cut 125-200 jobs based on the commission denying its rate requests. Even if it gets a more favourable decision in the general rate case, it will likely be "too late" for these employees, since new rates would not take effect until next June.
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