Originally created 09/26/96

Augusta's Olin Corp asks for electricity discount

ATLANTA - Georgia Power is asking regulators to approve its first-ever negotiated discount with a big industry that is threatening to leave the state without a better deal on electricity.

But other ratepayers will have to trust the Public Service Commission to make sure the discount for Augusta's Olin Corp. is a good deal for the public, because records of the transaction are sealed under a "trade secret" agreement.

The special rate is to be discussed at an Oct. 7 committee meeting of the PSC, a five-member elected board that oversees the utility and trucking industries.

It is the first attempt by Georgia Power to offer a discount to one of its large industrial customers, under a policy approved by commissioners last December intended to keep plants from closing or moving.

Olin makes bleaching products used by the pulp and paper industries, as well as in the making of paint, pharmaceuticals, pesticides, vinyl and other products. It employs about 100 people with an estimated $5.5 million yearly payroll.

Power is an unusually large expense for Olin because it uses electrically charged water during processing to separate sodium from chloride.

The plant's expected peak demand - 52 megawatts - is about what 10,000 houses would use during a hot summer day.

Georgia Power Vice President Leonard Haynes calls the agreement a winner for all customers, because losing a lucrative industry could have forced the remaining ratepayers to carry a bigger share of the utility's expenses.

"If a huge customer like Olin were not able to stay in the state or continue to operate, then a lot of those fixed costs that Olin is covering would end up reallocated on other customers," said Haynes, who is in charge of retail power sales.

Olin Plant Manager Marvin Osborne said the company would be at a disadvantage without the price break because its clientele is shifting from nearby paper mills to Gulf Coast-area vinyl manufacturers. The paper industry is largely phasing out chlorine bleach for environmental reasons.

Olin was also the beneficiary of a 1994 state law exempting electricity from sales tax if it is used as a raw material in manufacturing. The legislation by Rep. Jack Connell, D-Augusta, was requested by Olin and was drawn so that virtually no other company would qualify.

Electricity makes up more than half of Olin's product costs, Osborne said, declining to specify how much the company expects to save from the eight-year Georgia Power deal. The agreement was signed in April of this year and submitted to the PSC in May.

PSC examiners were given access to all financial details of the contract but were sworn not to divulge them publicly.

A copy of the contract available for public inspection at the PSC omits all dollar figures.

That worries consumer advocate Rita Kilpatrick of the PSC watchdog group Campaign for a Prosperous Georgia.

"We don't feel it's right to reward the super-high users - the energy hogs - in that way," Ms. Kilpatrick said, noting that the PSC-approved rates charged to other industries are already a matter of public record. "These type of agreements are hard to monitor, and we have found that the reporting requirements are pretty lax."

To qualify for the price break, Olin managers had to sign a statement saying they would move the plant's 100 jobs elsewhere without the discount.

Mr. Haynes said Georgia Power verifies independently whether the threat is credible, and the PSC can reject a contract if regulators determine that the prospect of job losses is not legitimate.

The utility is obligated by PSC rules to charge Olin or any other industry at least a break-even rate that does not result in shifting costs to other customers, Haynes said.


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