Alcoa spokesman Kevin Lowery in Pittsburgh acknowledged that lawsuits take time, but emphasized that the company “is trying anything and everything we can to minimize the impact on our people as well as to minimize the impact on the community.”
Alcoa and its relationship with the same company, originally Texas Power and Light, and more recently Luminant, has continued since the aluminum smelter was built in the 1950s. The electric company provided electricity for Alcoa’s aluminum smelter.
“It is not a good situation,” Lowery said. “If you read the lawsuit, you will see the things we have outlined that have transpired over the past several months, it is not the ideal situation the way you would want to deal with people in a partnership. We can’t sit here and say what the timetable will be in the judicial process. We want it to go as quickly as possible to get the relief needed for our employees. We will do everything on our side to push this forward.” Alcoa is seeking undisclosed monetary damages based on revenues, profits and amounts Luminant has been “unjustly enriched,” the lawsuit stated.
Meanwhile, Luminant answered the suit Monday denying charges and seeking a change of venue claiming that facts would develop indicating it could not receive an impartial trial in Milam County. Luminant also stated that it would demand a jury trial, and asked the court to issue Alcoa a take-nothing judgment.
Luminant spokesman Tom Kleckner, said the company denies Alcoa’s charges, and would vigorously fight Alcoa’s lawsuit in court. Luminant issued a statement reproving what it called Alcoa’s history of using layoffs to manage costs and drive its own profitability. “This is simply another example. Alcoa has made independent business decisions that have apparently now resulted in layoffs,” Luminant stated in a press release.
Luminant countered Alcoa’s accusations stating that for the past two months, it has offered Alcoa additional price protections along with a stable, predictable and economically viable power supply. Alcoa has refused, taking an inflexible stance, seeking power at unrealistically advantageous terms and demanding a price far below the prevailing commercial market price.
“We will continue to fully honor the long-term contractual agreement with Alcoa, under the terms of which Alcoa has received prices that are linked to the costs and performance of the Sandow 4 unit, which have been generally well below prevailing market prices,” Luminant stated in a press release.
Luminant is continuing to take proactive actions to help maintain a commercial relationship such as:
-In late June, Luminant and Alcoa signed an additional, short-term and mutually agreeable contract to provide Alcoa with electricity price protection. This was in addition to the long-standing power contract that Luminant has continued to honor.
-Luminant efficiently completed an unexpected but necessary maintenance outage at Sandow 4 to make repairs caused by equipment issues.
“While we continue to offer solutions, these layoffs are Alcoa’s business decision and they alone are responsible - not anyone else,” Luminant stated in the press release.
Alcoa on Friday announced dates for laying off employees after idling half its production in June blaming the decision on ongoing electrical supply issues with Luminant’s onsite power generating unit, Sandow Unit 4. Alcoa charged that Luminant - owners and operators of Sandow 4 - exposed it to uneconomical power prices to operate it aluminum smelter and atomizer unit in south Milam County, Alcoa stated in a press release. Three of the plant’s six operating potlines were idled as a result of the ongoing unit outages and local energy market costs increasing to as much as $2,000 to $4,000 per megawatt hour during peak hours, which is about 100 times the norm, Alcoa stated.
Since the lines were idled, representing approximately 120,000 metric tons per year of production, Alcoa has negotiated with Luminant to resolve the issues resulting from Luminant’s inability to operate Unit 4 reliably and has not been able to come to a satisfactory conclusion, Alcoa stated. As a result, the company has provided the required notification to bargaining unit representatives. Layoffs for approximately 100 employees will be effective August 31; layoffs for an additional 60 will be effective September 7, and an additional 140 employees will be notified in the fourth quarter.
David Edmonds, United Steel Workers of America Local 4895 president in Rockdale, could not be reached for comment Monday.
In the suit filed Friday in Judge Ed Magre’s 20th District Court in Cameron, Alcoa charges that Luminant:
- Falsely induced them into an agreement requiring a Luminant entity to make a major capital improvement to the Sandow Unit 4 power plant, which Luminant contends should be at Alcoa’s ultimate expense- by deliberately misrepresenting the improvement’s originally expected cost, and then further mismanaging the process so that the improvement’s ultimate cost may be over $300 million more than the originally represented amount;
- Covertly and unlawfully misappropriated resources at its Three Oaks lignite surface mine to benefit its other mining operations at Alcoa’s expense;
- Grossly mismanaged the physical and economic operations of Three Oaks Mine;
- Refused to comply with Alcoa’s requests for detailed financial and technical information, in direct violation of the defendant’s legal duties; and
-Unjustly and unlawfully benefited the electrical company and its elite investor-owners at the expense of Alcoa, its employees and thousands of shareholders.
John Thuestad, president of Alcoa’s U.S. Primary Products Division, stated that, “Unfortunately, the power plant that Luminant operates has not been reliable over the past year. The cost of power resulting from Luminant’s inability to consistently operate the Sandow Unit 4, has forced us to make this decision. We’re continuing to speak with Luminant to see if we can secure competitive power to ease the impact on everyone involved - and we have been forced to seek damages and other relief from them through ongoing litigation.”
