Decarbonization
March 5, 2026
Oklahoma smelter advances with power deal but energy prices are still tricky
Written by Greg Wittbecker
American Electric Power (AEP) is the parent company of the Public Service Company of Oklahoma (PSO), the utility company negotiating with Emirates Global Aluminium (EGA) and Century Aluminum for a new 750,000 metric ton/year smelter near Tulsa.
During remarks during AEP’s fourth quarter earnings presentation, CFO Trevor Mihalik highlighted the company’s increase in “total secured incremental demand,” representing 56 gigawatts (GW) covered by signed agreements.
“We are also seeing positive momentum in the SPP (Southwest Power Pool) region in Oklahoma, where contracted load has grown by 1 GW, driven primarily by a commitment with a large aluminum smelting customer.”
The AEP statements raise optimism about the chances of the smelter being built, as the entire project hinges on securing competitive power. However, judgement should be reserved until the details of a power agreement become clear.
One gigawatt is about the amount of power required for the 750,000-ton-per-year smelter, corresponding to about a 1,000-megawatt power plant.
While PSO and EGA/Century may have reached an agreement in principle on supply, the tough part lies in establishing price parameters.
Data center pricing cannot set the market
It is becoming clear in the power industry that the appetite for energy for data centers cannot set the market price for the rest of its customer base.
Retail and other industrial consumers are facing sharp cost increases. According to the Environmental and Energy Study Institute, electricity prices have risen from under $0.13 per kilowatt hour (kWh) in 2019 to more than $0.19 per kilowatt hour today.
Utilities are beginning to recognize they will need to price data centers in a different tier of rates than retail and industrial consumers.
In the case of EGA and Century, the companies are looking for middle ground that can justify the project.
The days of buying bulk power at under $40 per megawatt hour (MW/h) are gone. Conversely, primary aluminum producers are unable to compete with data centers that are willing to pay $100 MW/h or more.
This leaves them looking for a floating price agreement that is indexed to LME and Midwest transaction prices, bracketed by a floor and a ceiling. Those numbers might be $40-$60 MW/h, depending on how the formula is sensitized to the Midwest transaction price.
Given the timeline to build the smelter, which could extend to 2030, the parties will need some shared confidence that LME prices remain within a range that that allows EGA and Century to absorb higher-than-historical power costs.
The Midwest premium component presents an additional complication unprecedented levels seen today. Neither party is going to make any assumptions predicated on premiums remaining this high until 2030 and beyond.
Any formula being indexed to LME plus the Midwest premium will likely need to revert to premium levels seen before the influence of the sharp increase on Section 232 duty rates. That would mean premiums in the range of $0.10 to $0.20 cents per pound above LME.
Why it matters
Recent actions and statements from EGA and Century suggest growing optimism beyond what AEP has indicated:
- Bechtel has been hired to do preparatory engineering for the project.
- EGA and Oklahoma-based U.S. Aluminum have announced an agreement to explore development of a comprehensive downstream fabrication center near the smelter.
- EGA and Century have said construction could begin by the end of 2026.
It would be difficult to assume that AEP, EGA, Century or US Aluminum would be socializing developments on power, construction and downstream fabrication without a reasonable expectation that the power deal can be completed.
