A disagreement over how legislation should be crafted to keep Century Aluminum’s Mount Holly smelter operating could end up dooming the Goose Creek facility.
A bill that would let Century Aluminum buy all of its electricity on the open market was introduced in the state Senate on Thursday, but one of its sponsors says the proposal is a legislative long shot.
“There are great hurdles ahead of it,” state Sen. Larry Grooms, R-Charleston, said of the proposal, which he co-sponsored with state Sen. Paul Campbell, R-Berkeley County.
Grooms said he initially wanted to introduce a bill that would give Century Aluminum job-related tax credits similar to those granted as incentives to lure new industry. The company could have used the savings from those tax credits to offset high electricity costs the company says threaten Mount Holly’s future.
Grooms said he felt that proposal had a good chance of passing the state Legislature, but Century Aluminum rejected the plan.
Instead, the bill filed reflects what the company wanted. It would let the company buy all of its electricity on the open market and then reimburse state-owned utility Santee Cooper for any costs to transmit that power.
Mike Bless, Century Aluminum’s president and CEO, said the company “concluded that we do not want handouts or subsidies from the taxpayers as a matter of principle.”
Bless said the proposed legislation avoids that while protecting Santee Cooper ratepayers.
“We understand that it may be more difficult this way, but we are confident that once legislators and the public understand the bill, we will get a fair legislative hearing and are hopeful that it results in Mount Holly’s continued operation,” Bless said.
Grooms sounded less hopeful Thursday.
“I did not promise I could get that passed,” Grooms said, adding that he told Bless: “You all need to understand I want the plant to stay open, but what you’re asking for is a pretty high hurdle.”
One of those hurdles is timing — the bill must pass the Senate before a May 1 crossover deadline for proposals to be taken up by the House. Since this is the second year of a two-year session, any bills not approved this year would have to be reintroduced next session.
Grooms said he is disappointed Century Aluminum did not agree to the tax credit proposal — “I could probably sell that,” he said — but the bill introduced Thursday fulfills his promise to introduce legislation intended to save Mount Holly.
Bless has said Century Aluminum will have to close the Mount Holly plant if the company isn’t allowed to buy all of its power on the open market.
“Even with aluminum prices low today, Mount Holly survives if we can get full access to the market,” Bless said, adding that the legislation proposed Thursday “will save the jobs at Mount Holly” and the plant’s $1 billion annual economic impact on the Charleston region.
“And it doesn’t result in an extra penny of costs to Santee Cooper’s other ratepayers,” he said.
Santee Cooper spokeswoman Mollie Gore said the Moncks Corner-based utility is still studying the proposed legislation.
“We are continuing to look at it to determine what it could mean for our other customers,” Gore said. “At first blush, it looks like it would significantly change the structure of the utility industry in South Carolina.”
The proposal applies only to manufacturers located within Santee Cooper’s service area. Investor-owned utilities, such as South Carolina Electric & Gas and Duke Power, would not be impacted.
The Senate bill, based in large part on a plan Bless first put forward last year, would create an “industrial utility” designation that has authority to buy power from open-market suppliers, including those from out of state. The electricity then would be transmitted over Santee Cooper’s lines to a qualifying manufacturing plant.
The bill is written in such a way that only those companies using an “electrolytic reduction process” while manufacturing — a power-intensive way to refine metals — can qualify. The proposal also requires the industrial utility to be an affiliate of the manufacturer ultimately receiving the electricity.
Century Aluminum, which has its own federally licensed utility subsidiary, is the only manufacturer in the state that qualifies under the proposed legislation.
The proposal aims to protect Santee Cooper’s other customers from associated rate hikes by having Century Aluminum pay a quarterly “lost opportunity” charge to cover any revenue Santee Cooper might lose because its transmission capacity is dedicated to the smelter. Those charges would be reviewed by a joint legislative committee that oversees the state-owned utility.
“If Santee Cooper can demonstrate that any opportunity was in fact lost, we’ll pay every cent that they wish,” Bless said. “We’ll send them a check the next day.”
Century Aluminum also would have to pay the costs of transmitting the electricity and any related fees.
The proposal is being called a pilot program that would terminate July 31, 2018, unless Santee Cooper or legislators decide to extend it. Century Aluminum also could terminate the program with 60 days notice.
The plan would limit Century Aluminum’s open-market electricity purchases to 50 percent of the 400 megawatts the Mount Holly plant uses at full capacity. That means just one of Mount Holly’s two pot lines would continue operating in the foreseeable future.
“That was the result of a lot of discussion with various parties that worked on this to maximize the chance of (the legislation’s) success,” Bless said. “If people like it and it’s working well, perhaps it can be expanded in the future and we can start the second pot line, which we are anxious to do.”
Allowing Century Aluminum to buy enough electricity for the second pot line would require revised legislation.
Mount Holly cut its production — and staff — in half at the end of last year, citing the costs from a power agreement that requires it to buy 25 percent of its power from Santee Cooper. Bless said that deal puts Mount Holly’s power costs higher than 77 percent of the world’s smelters.
“We can run that plant and make a profit if we can get full access to the marketplace,” Bless said.
About 300 people now work at the smelter, down from 600 employees a year ago.
The proposed legislation was referred to the Senate’s Judiciary Committee for further review. A similar bill is expected to be introduced in the House next week.
Reach David Wren at 843-937-5550 or on Twitter at @David_Wren_