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home : news : local   April 29, 2016

3/8/2013 6:06:00 AM
Peru industries adapt to new electric rates


Jeff Dankert
NewsTribune Reporter



The eight largest electrical users in Peru are adapting to revised rates for large industries, with half benefiting and the other half paying more.
The new rates began in August for Unytite Inc., Eakas Corp., MetoKote Corp., James Hardie Building Products Inc., Canam Steel Corp., Maze Nails, American Nickeloid Co. and Pretium Packaging.
Unytite, Canam, Maze Nails and Nickeloid pay more because they use most electricity during one shift.
This week Unytite said it will likely move its hot-forming operation out of the city so that this electric-hungry process will get lower electric rates.
The eight companies each account for 500 kilowatts or more of demand for any three straight months, placing them in the highest category, said Jim Loveland, plant manager at Maze Nails, spokesman for the companies.
The companies and the city began negotiating in October 2010 and new rates were set to begin in February 2011, Loveland said. But the city delayed it until last August.
Negotiations led to phase-ins. The first phase, in place now, caps the rate at 10 cents per kilowatt-hour. Industries cannot be charged more than that.
“Some customers, because their rate is derived from a formula ... they may very well be paying less than that,” Loveland said.
Loveland said the formula applies two components to each monthly bill:
-The demand component, using the maximum electric draw in one hour. If the charge is $11.60 per kilowatt and the peak is 100 kilowatts, the charge would be $1,160.
-The energy component, the actual kilowatts-hours used. This is the same way residential bills are calculated.
Maze faces the possibility of moving one of its operations, most likely energy-intensive wire-drawing, where steel rods are reduced to nail size, Loveland said.
The next rate phase begins in August with a cap of 15 cents per kilowatt-hour.
“Likely our rate will go up to about 12.6 cents. That represents about a 60 percent increase,” he said.
The final phase starting in August 2014 would remove the cap, Loveland said.
The city’s recent rate study examined how the city buys electricity from the municipal cooperative, Illinois Municipal Electric Agency (IMEA), city clerk Dave Bartley said. The study consultant, BHMG of St. Louis, said that for large industries, “the margins were uneven” and suggested applying load factors to rates, he said.
“The city council determined that it was in the best interest to have a component tied to load factors,” Bartley said. “The intent of the city’s rate study was to be fair.”
For example, James Hardie is running all the time, spreading out its load. Canam uses a process periodically that places a large but temporary load on the grid, Bartley said.
Ron Grant, operations manager at Canam Steel, said the rates will have “a substantial negative impact on our operating costs.”
“It forces us to look at all options and moving production out of Peru to another Canam location is one of the options,” he said.
City officials met with the eight companies over several months and is still working to improve electrical efficiencies at the plants to reduce costs, Bartley said.
“I know that the city of Peru is committed to providing competitive electrical rates,” Bartley said.
Loveland disagrees.
“We can get far better pricing if we were able to shop (for electric rates),” he said. “We cannot go out and buy our electricity somewhere else.”
But competitive shopping is barred by a 1996 state statute, which resulted from complaints by municipalities and utilities coming after each other in their own territories, Loveland said.
The statute provides that any city that supplies electricity shall have the exclusive right to all customers within its boundaries, Loveland said.
“We are pursuing a legislative remedy to this,” Loveland said. “This is the city abusing its privilege ...  to avoid competition and it’s only because that statute exists can the city do this.”
The city has an obligation, in a 50-year contract with IMEA, to provide IMEA paying customers, Loveland said. The city “cannot arbitrarily let customers go because it harms (IMEA),” Loveland said. Paying customers within IMEA’s member cities help pay bonds IMEA has used for equipment and major projects such as the new Prairie State Coal Plant, he said.
“Our problem as manufacturers is that the demand rate is being unfairly borne by these companies when it should be shared by the other customers,” Loveland said. “It’s an easy way for the city to make a tremendous amount of money.”
Eakas is building an expansion and received help with the project from the city and state. Plant manager Jeff Wagner acknowledges that. However, had its parent company, Sakae Riken, known of electrical rate changes, Eakas might not have pursued expansion.
“This issue is not something we saw coming,” Wagner said.
“Where it goes in the future we don’t know. It’s largely based on demand and constant usage. It’s not all bad. It’s difficult but it’s not something that’s insurmountable and we’re working with the powers that be to straddle the hurdle. It’s benefiting us at this point. It’s not all doom and gloom. There are people that are having a slight benefit from it because they are 24/7 operations.”
At American Nickeloid, general manager Mike Stariha said his plant is considering options because it is not an around-the-clock factory.
“We’re seeing increases and it’s difficult to swallow,” he said. “We really can’t pass this on to our customers.”
Once the phase-in raises the cap to 15 cents, Nickeloid might mitigate this by moving operations and workers to second and third shifts. But there is a cost to this move in workers’ quality of life, Stariha said.
“We’re in negotiations (with the city) to partially mitigate this,” he said.
Phone calls and e-mails to Peru Mayor Scott Harl asking for comment were not returned by press time.

Jeff Dankert can be reached at (815) 220-6977 or perureporter@newstrib.com.








Related Stories:
• Peru electric rate may drive Unytite to move part of operations





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