Noranda says law offers no guarantees again rising power costs

NEW MADRID, Mo. -- In February 2003, the Noranda aluminum smelting plant in New Madrid, Mo., came to the Missouri Senate for help. Suffering from rising power costs, the company and the jobs of over 1,100 workers were facing extinction in one of the poorest regions of the state. In response, the government passed legislation which Noranda officials say has given them a chance to survive. But one year later, the overall effects of the measure are still in question.

Noranda is a Canadian mining and metals company with operations all over the world. Its aluminum smelting plant in New Madrid is the largest single user of electrical power in Missouri, sucking up as much electricity as the entire city of Springfield, Mo. Aluminum smelting requires 470 megawatts of electricity flowing through the plant 24 hours a day.

Two years ago, this resulted in a yearly power bill of $70 million. A year later that bill had spiked to $100 million. That 42 percent jump, coupled with the lagging economy, left Noranda with a critical problem.

"That $30 million jump pretty much took care of any profit," said Steve McPheeters, communication manager of the New Madrid plant. To compound that problem, the law dictated that Noranda could not seek purchase of power from any provider other than the local plant, Associated Electric in New Madrid. Its only options were to buy electricity through the city or directly from that plant. Noranda brought the issue to Peter Kinder, president pro tem of the Senate.

"They basically came and sounded the alarm," Kinder said, "and on the outcome hinged the survival of 1,100 union steel workers' jobs."

Kinder said he understood the pressure Noranda was under in the expanding global market of aluminum processing. Kinder said he recognized Noranda had no ability to set their price for their product in the international market. As a result, Kinder sought to quickly pass a bill that would allow Noranda to purchase power from whomever they wish in a deregulated market.

In late February 2003, Kinder introduced Senate Bill 555, calling for the allowance of aluminum smelting facilities to contract for the purchase of electric power without being subject to Public Service Commission jurisdiction. By mid-May the act had passed both houses and garnered Gov. Bob Holden's signature, becoming law. Furthermore, it passed with a two-thirds majority, which enabled the law to go into effect immediately.

"It basically enabled us to talk to multiple providers," McPheeters said. He said now they can negotiate in good faith with providers to find a situation that's most affordable.

Since May 2003, Noranda has been under a two-year contract with an electric company from Canada that owns 40 percent of Noranda. Though power costs continue to rise, that contract and an improving economy have allowed Noranda to stay afloat for now. But McPheeters said the current situation is not a long-term solution.

"Obviously it's helped, but the legislation doesn't guarantee us affordable power," McPheeters said. "Prices are still rising and you can't predict the fluctuating energy market. It's still hard to find fixed long-term contracts."

trehagen@semissourian.com

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