For much of the past year, Alcoa and Santee Cooper executives have kept in close contact, hoping to prevent a Lowcountry doomsday scenario.
The aluminum manufacturer hinted last summer that, without long-term “rate relief,” the future of its Mount Holly smelting plant, and the 600 jobs associated with it, were in question.
The state-owned utility didn’t want to lose its largest industrial customer, but faced its own rising costs.
Looming over the conversations was a June 30 date by which Alcoa had to tell Santee Cooper whether it planned to continue operating past 2015.
The long-term issue hasn’t been solved, but after much back and forth, the nearby metal maker and electricity provider have agreed to postpone the deadline until next June to allow more time to negotiate a multi-year deal.
Both sides framed the extension, formalized with signatures collected late Wednesday, as an interim success.
“This is a good first step to give us an opportunity to work on the long-term solution for the facility,” Alcoa Mount Holly plant manager Mike Rousseau said Thursday. “Without this solution, it put these jobs at very serious jeopardy.”
A Santee Cooper spokeswoman also focused on the employment implications of the postponement.
“One of the main focus points has been to keep those 600 jobs that Alcoa provides, and I think what we’ve been able to accomplish in terms of this agreement helps us do that for longer,” said Laura Varn, the utility spokeswoman. “That’s good news for the whole region.”
Rousseau said the agreement also includes “the potential for some short-term rate reduction.” But Varn said “there’s been no decisions made on that.”
“That will be one of the factors that will be considered in the ongoing negotiations for the long-term contract,” she said.
Rousseau declined to say how Santee Cooper’s series of proposed rate increases, due to take effect at the end of this year, would figure into Alcoa’s extension. Varn said the two issues are unrelated.
“We set our rates based on the customer class, not based on any one individual customer,” she said. Santee Cooper serves 163,000 residential and commercial customers, mainly in Georgetown and Horry counties, with about 8,000 in Berkeley County.
The utility serves about 30 industries, such as Alcoa, and sells about half the power it produces to electric cooperatives.
Asked if Alcoa would pay the same rates as Santee Cooper’s other 29 industrial customers, Varn said, “We can’t go into specific contract details.”
And neither side would say what the gap between their negotiating positions is.
“We don’t give, you know, that specific details on what we have to have or where we’re at, because we’re in a very competitive market in what we make, and electricity’s a big component of that,” Rousseau said.
The Mount Holly plant has been a part of the Lowcountry since 1977, when construction started on what was once Alumax. Production started in 1980, when Santee Cooper started providing electricity to the site.
Considered to be one of the most efficient plants in the Pittsburgh-based Alcoa portfolio, the Mount Holly factory employs 520 full-time workers, and the rest are contractors, Rousseau said.
Situated on about 4,500 acres just north of Goose Creek, the plant, which is nearly half-owned by California-based Century Aluminum, can churn out 235,000 tons of primary aluminum annually, according to its website. Its principal uses are in the transportation and construction industries, Rousseau said.
Alcoa pays about $4 million a week for electricity, and late last year, the president of Alcoa Global Primary Products in the U.S. said the Mount Holly facility “has the highest power cost of any smelter in the United States.”
Santee Cooper has disputed that its rates are especially high, and it cited rising fuel costs, increased transportation charges and uncertainty over the effect of current and future federal environmental regulations as reasons for rate increases.
Rousseau, the plant manager, said Alcoa would like a 20-year contract to guarantee the future of the local operation. Santee Cooper welcomes that prospect, Varn said.