Felman's proposal would tie the plant's power rates to the costs of raw materials used in production and commodity prices. The plan caps the amount of discounts the company could receive in a given year at $9.5 million, which represents the amount of Appalachian Power's fixed costs the company currently pays. When prices are low, Felman's power discounts would be paid for by shifting costs to other ratepayers.
To make up for those costs, the company said it would pay higher rates when its material costs recovered. That benefit would then be passed on to other customers in the form of a rate decrease.
Appalachian Power has objected to a provision that would allow Feldman to carry over the $9.5 million discount from one year to the next. The utility said in testimony filed with PSC that Feldman potentially could go an entire year without paying for power.
Consumer Advocate Division analyst Deanna White said it would have "the effect of giving [Felman] a 'checkbook' and a pen to write an unlimited discount on its electric costs."
Nuss said the proposal ensures Felman pays 100 percent of Appalachian Power's variable costs, mainly for fuel and power generation, during the contract. The discounts would only apply to the $9.5 million in annual fixed-cost payments.
"We can never pay less than variable costs unless we've already paid more in the past," he said. "It's a matter of a timing issue, but it doesn't affect the bottom line that we always will pay variable costs in the life of a contract.
"There is no risk to us not paying the full variable costs," he said.
The company submitted its request for a 10-year special power rate under a 2010 law that was intended to help Century Aluminum restart its plant in Ravenswood. The law allows manufacturers that consume large amounts of energy to negotiate rates tied to commodity prices.
The PSC will hold formal hearings in the rate case Dec. 9 and 10 at its Charleston offices.