WARREN, Ohio -- The Public Utilities Commission of Ohio approved Wednesday a "unique arrangement" that will result in reduced electric rates for struggling producer Warren Steel Holdings LLC and allow that mill to reopen, according to documents.
Warren Steel submitted an application for reduced electricity rates June 4, contending that it was paying higher rates than its out-of-state competitors and causing it to lose business.
The company shuttered its plant on Mahoning Avenue in late March, but hasn't placed any of its approximately 200 employees on layoff.
"Warren has targeted Aug. 1 as its restart date," the PUCO order states, noting that the company has three main customers that are interested in placing orders with a quick turnaround time.
Warren Steel employs 180 wage and salary workers, plus another 66 full-time contractors. When overtime is taken into account, those jobs translate into 309 full-time equivalent positions, the company says.
Under the terms of the new agreement, Warren Steel has committed to have a minimum of 200 direct employees and 25 contract employees after the first full month of restarted operations, the PUCO order states.
The company has also committed to $10 million worth of capital investment and major repair expenditures over the first 12 months of restarted operations, and $33 million in capital improvements over the length of the reasonable term agreement.
Should the company add a new air separation plant, then at least another $15 million in capital expenditures would be required under the approved deal Warren Steel is to provide annual updates on capital expenditures and quarterly reports regarding employment levels.
Once the plant is restarted, the company anticipates it may increase its workforce to 374 full-time equivalent jobs, documents say. Total net impact of operations under the new agreement would be 1,128 jobs, $53.2 million in employee compensation, $4.3 million in tax revenues and $81 million in purchases from Ohio vendors.
Should Warren Steel's account fail to remain in good standing, the discounts would be suspended until the account is paid in full and returned to good standing, the stipulation agreement says.
“Being granted the ‘reasonable arrangement’ is a critical component to ensuring the long-term viability of the company,” John Scheel, vice president of Warren Steel Holdings, said in a statement. “We will now be able to resume operations, avoid layoffs, better compete in a highly competitive market and invest additional capital into the plant and take advantage of attractive current business opportunities."
Scheel thanked the PUCO "for its expedited and thorough review of our application, as well as FirstEnergy, Ohio Edison and the numerous government employees that showed their support for this important matter.”
Warren Steel argued in its initial filing request that its electric costs stood in excess of $75 per megawatt an hour, or MWh, while in-state and out-of-state competitors were paying rates of $48 MWh, based on May 2012 data.
"The rate that Warren Steel paid for electricity when operating was much higher than the rates paid by its predecessor, CSC, or any of its competitors," the filing says.
According to documents filed with the PUCO, the reduced-rate plan covers a six-year period in which Warren Steel would pay $50 MWh the first year, $51 MWh the second year, and $52.5 MWh during year three. Years four through six would constitute a rate 20%, 10%, and 5% respectively below the applicable Ohio Edison standard service offer price.
The maximum rate discount to be received by Warren for each year of the arrangement would be capped at $10 million, documents say.
U.S. Sen. Sherrod Brown, D-Ohio, and U.S. Rep. Tim Ryan, D-13, issued a joint statement applauding the PUCO for its ruling, which they separately lobbied for in letters to the chairman of the PUCO.
“A plant closure would have cost the region hundreds of jobs and employees would have lost $53 million in compensation," Brown said. "By approving a fair electricity rate, the Valley will avoid job loss and potentially see new jobs created in the future. PUCO made the right decision, and as a result, the Mahoning Valley will be strengthened.”
Added Ryan, “This decision will help Warren Steel Holdings remain competitive as they seek new opportunities for growth and increased employment.”
Warren Steel, formed as an LLC in 2001, purchased the 369-acre site after CSC, formerly The Copperweld Steel Co., filed for bankruptcy that year and closed the mill. Warren Steel also purchased CSC's newly installed melt shop and continuous caster before the bankruptcy and began making investments at the location, the filing says.
In 2007, Warren Steel began hiring and training a new workforce, and steelmaking operations resumed at the site in 2009.
Since 2009, the company has pumped in $90 million worth of ownership capital contributions, has loans exceeding $60 million, provided other capital investment of more than $24 million, and has tallied working capital expenditures of $125 million, documents say.
Copyright 2014 The Business Journal, Youngstown, Ohio.
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