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Noranda power rate could up Wal-Mart costs

Mar 11, 2014 | 03:02 PM | Michael Cowden

Tags  Noranda Aluminum Holding, Layle K.


CHICAGO — Wal-Mart Stores Inc. could see increased power costs if Noranda Aluminum Holding Corp. is granted a lower electricity rate for its smelter in New Madrid, Mo., the giant retailer said in a filing with state regulators.

Bentonville, Ark.-based Wal-Mart has more than 70 retail stores and related facilities that receive power from Ameren Missouri, a subsidiary of St. Louis-based utility Ameren Corp., according to a March 7 filing with the Missouri Public Service Commission (PSC). Those facilities use about 190 million kilowatt hours (kWh) of electricity annually, the company said.

"The relief being requested ... could result in significant changes to Walmart’s cost of electricity, substantially affecting its business and operations in Missouri," Wal-Mart said in the filing.

Franklin, Tenn.-based Noranda is seeking a lower electricity rate in Missouri, without which it has said it will need to cut 150 to 200 jobs or ultimately close its 260,000-tonne-per-year New Madrid smelter (amm.com, Feb. 13).

A Noranda spokesman declined to comment March 11 on Wal-Mart’s motion to intervene in the rate case.

Wal-Mart said it was "currently developing" its stance in the rate case, according to the March 7 filing with the PSC. "We are still developing our position," a spokeswoman told AMM March 11.

Two cement companies also have sought to intervene in the case, according to March 7 filings with the PSC. Like Wal-Mart, neither of the cement companies has yet adopted a position in the case, the documents indicate.

Noranda has said that a lower rate would be "revenue neutral" to Ameren and would increase rates for other consumers by 1.8 percent. The company’s proposal has received support from such groups as the Missouri Retailers Association, which includes large commercial consumers, and the Missouri Industrial Energy Consumers, whose members include big industrial companies.

"Without an expedited decision in this matter, Noranda will begin the process of winding down its smelter operations for imminent closure," the groups said in a Feb. 19 filing with the PSC. A shutdown of the New Madrid smelter would lead to higher electricity costs than would the company receiving a lower rate, they said, noting that a closure also would hurt Missouri’s economy.

But Ameren said in a March 3 PSC filing it was "surprising" these consumers were taking such a position, given that Noranda’s request for a lower rate would boost electricity costs to consumers by at least $48 million annually and perhaps by more than $500 million over 10 years. In addition, Noranda has not said that a closure of the New Madrid smelter is "imminent" but has instead stated that the facility would be "subject to closure," the utility said. "Every business is ‘subject to closure’ by its owner at any time."

"Without the requested rate reduction, even with our planned reductions in other costs, the New Madrid smelter would have insufficient liquidity and be subject to closure," Noranda president and chief executive officer Layle K. "Kip" Smith said in Feb. 10 filing to the PSC.

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