NEW MADRID, Mo. (AP) — Noranda Aluminum Inc. announced Tuesday that it is laying off up to 200 employees and suspending an expansion project at its southeast Missouri smelter because state regulators refused to lower its electricity rates.
The cutbacks by Noranda come less than two weeks after the Missouri Public Service Commission denied its request for a roughly 25 percent reduction in electricity rates that it pays to Ameren Missouri.
"It is heartbreaking to me to be forced to take actions that eliminate jobs, but these actions are necessary to help us remain competitive in the near-term," Noranda President and CEO Kip Smith said in prepared remarks for a press conference at its New Madrid aluminum smelter.
"The long-term future of this plant depends on our ability to secure an affordable and competitive power rate," Smith added.
Noranda employs nearly 900 people at the smelter, which it says produces 14 percent of the nation's primary aluminum. Electricity comprises about one-third of its production costs, and the company had sought a $48 million reduction in its annual electricity bill. That would have resulted in higher rates for other customers of Ameren Missouri.
While rejecting the request, Missouri utility regulators said they remained unconvinced that Noranda faced a "liquidity crisis" and that other consumers would be hurt more if Noranda quit getting its electricity from Ameren than if it received a rate cut. The PSC also said that Noranda's request amounted to an "economic development subsidy" that would have been better directed to state legislators.
Noranda officials had warned during the regulatory hearings that it could have to lay off up to 200 employees and eventually shut down the smelter if it didn't get lower electricity rates.
Smith said Tuesday that the Franklin, Tennessee-based company would ask Missouri regulators to reconsider the rate reduction, though it has already begun the process of eliminating 125 to 200 jobs over the next six months.
Noranda also said it is suspending a $38 million expansion project at its New Madrid facility that has been underway since 2010 and still had about $30 million of spending to go. The company said it will consider whether to build a planned $45 million aluminum rod mill in an unspecified neighboring state instead of Missouri.
Gov. Jay Nixon issued a written statement describing Noranda's announced cutbacks as "unfortunate for the region and for our state." He noted that the Office of Public Counsel, which represents the interests of residential consumers, had proposed a compromise that would have reduced Noranda's electricity rates by 16 percent. Noranda supported the proposal.
"The job losses announced today are particularly troubling because the Office of Public Counsel had proposed a workable path forward, supported by consumer advocates, that would have protected ratepayers and avoided this unfortunate outcome," Nixon said.