Santee Cooper's largest customer could pull out of the Lowcountry if it doesn't get a competitive power rate.
Aluminum-maker Alcoa, one of the Charleston region's largest employers, is renegotiating its power contract with the state-owned utility and is threatening to leave if those talks go sour, Santee Cooper spokeswoman Laura Varn said.
The Berkeley County smelting plant's contract with the utility expires at the end of 2015, but a renegotiation clause allows the plant to alert Santee Cooper by June if it wants to terminate the deal.
"We are hearing that they will pull out if they don't get a competitive rate," Varn said.
Alcoa Mount Holly plant manager Mike Rousseau said he hopes that an agreement can be reached, but he said the cost of electricity is an obstacle for the company.
"Power is a big component of our cost structure," Rousseau said. "We produce a commodity that is sold on the worldwide market. The price is pretty well set, and it becomes difficult to pass costs, such as price increases with electricity, on to our customers. We just have no way to do that."
Talks are in the early stages with the company that makes up 10 percent of the utility's total electric sales.
"We recognize that Alcoa operates in a global market and must remain competitive," Varn said. "The situation we are in right now is that Santee Cooper is also facing some increasing pressures, and circumstances such as rising costs that are impacting our business."
Rising fuel costs, increased transportation charges and uncertainty over the effect of current and future federal environmental regulations are affecting power rates, costs that inevitably must be passed along to Santee Cooper's 164,000 customers and 30 large industries, including Alcoa, Varn said.
"The good news is we have a history of working with Alcoa over the past several decades, and we have been down this road before with them," she said. " It's a top priority for us, and we are doing all we can to find a workable solution."
Rousseau said, "We have to get to a rate that allows us to remain competitive, and we are working with Santee Cooper to do that. Ultimately, we have to figure out a solution to this."
Gov. Nikki Haley on Tuesday weighed in on the matter. South Carolina has one of the nation's highest unemployment rates at 10.5 percent.
"We are not going to lose Alcoa jobs over utility rates," she said. "We are not going to let that happen. What Santee Cooper has to do is prioritize and cut and see how we are going to get there. Alcoa has to realize that we can't give them everything they want."
In the larger picture, she said the state needs to make sure it is creating a competitive environment for all businesses in the area.
"Alcoa is just one of the people feeling the symptoms," Haley said. "My job is to find out why we are where we are."
The 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 560 full-time workers and another 80 contractors and full-time temporary employees, Rousseau said.
Situated on about 4,500 acres just north of Goose Creek, the local plant can churn out 235,000 tons of primary aluminum annually, according to its website.
Nearly half-owned by California-based Century Aluminum, the plant is operating at full capacity, Alcoa Mount Holly spokeswoman Erin Pabst said.
Reach Warren L. Wise at 937-5524.