Energy Prices Shutter Ormet Aluminum Plant

Electricity rate hikes have forced aluminum producer Ormet Corp. to announce the closure of one of its plants in Hannibal, Ohio, reports Forbes.

In February, Ormet filed for bankruptcy protection citing “exceedingly high and uncontrollable power costs.”

Low metal prices have also been a contributing factor in the company’s problems: Prices for aluminum on the London Metal Exchange are now below the cost of production for many producers, according to the news service. But production costs have been pushed up exponentially by rising electricity rates and the factory – whose peak electricity demand is 500 MW, similar to that of a city the size of Pittsburgh – is currently operating at a loss, Forbes reports.

In 2007, the average price paid for electricity by aluminum smelters worldwide was $0.02 per kWh, according to World Bureau of Metal Statistics. By contrast, 2007 saw industrial electricity customers in Ohio pay an average of $0.09 kWh, according to Ohio’s Utility Rate Survey, the news service reports.

But last week the Public Utilities Commission of Ohio ruled that Ormet would have to pay for electricity at a rate substantially above what the aluminum maker said it needed to emerge from bankruptcy.

Since 2009, Ormet has receiver around $308 million in subsidized power. Other industrial customers in Ohio have paid, on average, $2 to $3 a month to support the subsidy, which is the largest of its kind in the state, reports Forbes.

Initiatives aimed at combating climate change have driven electrical rates for industrial customers in the UK and the EU up by 28 percent since 2003, according to research by Business Electricity Prices released in March, an online portal for businesses to compare electric costs across the UK.

Business Electricity Prices says its system, which compares the business commercial tariffs across a number of the leading suppliers, shows a large gap between the one with the highest corporate prices, and the supplier with the lowest prices.