Alcoa Inc., Alcoa Power Generating Inc. (APGI) and Alcoa Corp. on July 12 jointly petitioned the New York State Public Service Commission for a declaratory ruling that the commission need not review under state law the transfer of ownership interest in APGI from Alcoa Inc. to Alcoa Corp.
As part of a larger transaction, Alcoa Inc., the parent company of APGI, will be separated into two independent, publicly-traded companies. One will be Alcoa Upstream Corp. (to be renamed Alcoa Corp. prior to the separation) that will comprise five business units that today make up Global Primary Products – Bauxite, Alumina, Aluminum, Casting and Energy – as well as the rolling mill operations in Warrick, Indiana, and Saudi Arabia that are currently part of the Global Rolled Products segment. Alcoa Inc.’s present Value-Add businesses will remain with the present company, which will be renamed Arconic Inc. These will include the existing business units, Global Rolled Products (other than the rolling mill operations in Warrick, Indiana, and Saudi Arabia, which will move to Alcoa Corp.), Engineered Products and Solutions, and Transportation and Construction Solutions.
The reorganization and eventual separation of these two companies is expected to be completed in the second half of 2016. As a result of the reorganization, APGI will move from being a subsidiary of Alcoa Inc. (soon to become Arconic), to being a subsidiary of Alcoa Corp.
APGI owns and operates limited generation and limited and discrete transmission facilities in various locations throughout the United States that are used in conjunction with APGI’s primary focus of providing electric power to aluminum manufacturing facilities owned by Alcoa Inc. The Federal Energy Regulatory Commission authorized APGI to make wholesale sales of energy, capacity, and ancillary services at market-based rates in 1999.
APGI serves no general retail load and generates, purchases and/or manages electricity for its only customer, Alcoa Inc., which utilizes the power in its industrial processes at various locations. APGI is only incidentally in the electric transmission business although it owns transmission facilities that are part of the interstate transmission grid. APGI’s transmission facilities were constructed to connect Alcoa industrial plants to either generation owned by APGI or to other electric utilities. They are rarely used for transmission by others.
APGI has only its parent company, Alcoa Inc., as a native load customer and has no franchised service territory in any state for the sale of natural gas or electricity. APGI has no captive wholesale or retail customers, nor does it have market power in any market in which it operates. Moreover, APGI is not affiliated with any franchised electric or natural gas utility or any entity with captive wholesale customers.
In 1999, Alcoa Inc.’s separate power supply subsidiaries were reorganized to create a single jurisdictional entity, APGI, with transmission and generation facilities in five business divisions in separate locations. Only one of those divisions, the Long Sault Division, is located within New York. The Long Sault Division owns certain limited and discrete transmission facilities in New York used to connect Alcoa’s smelting and fabricating facility near Massena, New York with the New York Power Authority (NYPA), National Grid US and Cedars Rapids Transmission Co. (CRT). The Cedars Lines are two 115-kV transmission circuits that connect at mid-span at the International Boundary with Canada to corresponding facilities that belong to CRT, a former subsidiary of Alcoa that was sold in the early 1980s to Hydro Quebec.
The Cedars Lines are owned by the Long Sault Division and only connect National Grid to CRT. These double-circuit 115 kV transmission lines are each approximately six miles in length and the capacity is under a long-term contract to CRT through 2035. Additionally, there are three Moses-Alcoa 115 kV transmission lines (MAL lines), each roughly seven miles in length and owned 85% by Long Sault with the remaining 15% owned by NYPA. These lines connect NYPA’s St. Lawrence-FDR hydroelectric project to the Alcoa manufacturing complex near Massena, New York. Long Sault also uses these lines to provide transmission service for the Town of Massena under a long-term contract.
As part of the Rreorganization, APGI will come under ownership of Alcoa Corp., and some of APGI’s presently affiliated customers will become non-affiliated as a result of the separation into the two groups. These customers will continue to receive power from APGI but instead of being delivered by an affiliate under intra-company arrangements, the power will be delivered by a non-affiliate (albeit over the same facilities) pursuant to an Open Access Transmission Tariff whose reasonableness will be evaluated and approved by FERC.
In addition, the petitioners noted that the Massena Electric Department (MED) purchases electricity from NYPA that is delivered in part over APGI (Long Sault Division) facilities. The rate for delivery of that power is fixed by a contract between APGI and MED regulated by FERC and that rate will not change as a result of this reorganization.
The reorganization and eventual separation of these two companies is expected to be completed in the second half of this year.