Century Seeks to buy power on open market, Big Rivers looks to bounce back

by Matt Hughes

J-E News Editor

For the second time within the last twelve months, Big Rivers Electric looks to lose one of it’s biggest customers. 

Century Aluminum in Sebree, formerly Rio Tinto Alcan, contributes roughly $165 million in annual revenue to the Henderson County based power plant. Century has already announced that they will no longer be purchasing electricity from Big Rivers as of January 31, 2013.

Earlier this month executives with Century demanded that the Sebree based aluminum smelter be granted the right to purchase power on the open market, otherwise they planned to close the 520-employee plant.

The Public Service Commission (PSC) is expected to render a decision on the issue before January 31, 2014.

Last summer Century Aluminum made the same move with their Hawesville, Kentucky based plant. State legislators granted the Hawesville plant, which paid Big Rivers $205 million annually, that right. Since then Century has purchased the Sebree plant and now seeks the same rights in that location as well.

The loss of Century in Sebree brings Big River’s lost revenue over the last year to roughly $370 million. The power supplier is looking to offset the loss with a $70.4 million rate increase on it’s other customers. That’s roughly the same amount of money that Century expects to save by purchasing their power on the open market.

The PSC has until April to render a decision on the rate increase.

“Unfortunately, cost cutting alone won’t eliminate the financial deficiency that will result from them leaving our system,” Marty Littrel, the Managing Director Communications and Community Relations. “It’s been very difficult for Big Rivers, but we’ll have to idle our Wilson plant that’s located in Ohio County this February and our Coleman Plant located in Hancock County this summer.  Combined we’ll be losing 188 employees due to the situation created by the aluminum smelters.   This entire situation was due to low aluminum prices NOT electric rates.  Those two plants used about $136 million per year of west Kentucky coal, so there are ripple effects from our plant closures on top of the job losses for Big Rivers employees.  Again, it’s very difficult times for us right now.  Our employees have been very dedicated by safely and reliably operating these generating units during the current times.  We’ve been very blessed to have such a dedicated workforce.”

In the meantime, Littrel said that Big Rivers is looking to offset the loss of revenue by putting off passing the expense on to their customers, which include electric cooperative Kenergy.

“Big Rivers and its Member-Owners (Kenergy, Jackson Purchase Energy and Meade County RECC) have decided to ask the PSC to approve increasing the utilization of its Reserve Funds to entirely offset the rate increase created by Rio Tinto Alcan terminating its retail electric service agreement,” he said. “We’ll use these funds until they are depleted.  By using the reserve funds, the estimated “system-wide” electric rate increases will not affect customer bills until the following time frames:

•Residential and commercial customers WILL NOT be affected until April 2015.

•Large industrial rates WILL NOT be affected until July 2014.

Big Rivers is already looking at replacing the Century contracts with others. According to Littrel, Big Rivers is a finalist for several energy proposals in Nebraska and Oklahoma.

“I’m limited to discuss because of confidentiality concerns, but we are in talks with several utilities across the country, plus Big Rivers and its distribution owners have been courting some large economic development prospects within the state.  Again, in time, I’m confident we’ll be successful in mitigating the rate increases as we are still a low cost producer of electricity.”