Aug. 27--Luminant officials said Tuesday that they would wage a vigorous court battle against charges that they manipulated power prices charged to Alcoa for fueling its Rockdale aluminum smelter.

Alcoa filed suit against its contracted power provider Friday as officials announced plans to lay off 400 at the smelter. The aluminum producer shuttered three of the smelter's six operating potlines -- cells used in aluminum production -- in June, company officials said.

"We will continue down the timetable we announced for specific layoffs," Alcoa spokesman Kevin Lowery said Tuesday. "While that is going on, our company is doing anything and everything we can to help mitigate the impact on our employees and the community at large. That includes filing this suit."

Alcoa officials said in the suit that their relationship with Luminant -- formerly TXU Corp. -- took "dramatic turns for the worse" after a group of investors took the utility private in late 2007. Alcoa had been working with TXU entities to supply power to the smelter for several decades.

The suit states that Luminant drove Alcoa's per-megawatt-hour power prices to a level almost 100 times higher than the average under its contract for the smelter with the provider through poor maintenance of power supplies, mismanagement and misappropriation of financial resources.

Alcoa is seeking a declaratory judgment from the 20th District Court in Milam County and unspecified damages.

Luminant spokesman Tom Kleckner said Tuesday that the power provider was reviewing Alcoa's claim and declined to comment further on the issue.

In a written statement issued Friday, Luminant officials said they had offered Alcoa additional price protections and 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," officials said.

Alcoa officials said Friday that they would seek damages and other relief from Luminant and that power interruptions to the Rockdale smelter had forced Alcoa to buy energy on the open market during peak consumption.

Meanwhile, company officials said they planned to cut 100 jobs Saturday and an additional 60 Sept. 7 and to notify an additional 140 employees of layoffs in the fourth quarter.

Lowery said Tuesday that the timeline for 100 additional cuts that would affect contract workers would be varied. The smelter currently employs 900.

The cuts could affect 278 to 300 members -- or roughly half -- of United Steelworkers Local 4895 members, union President David Edmonds said Tuesday.

"We're very disappointed," he said. "We were hoping for some good news between Alcoa and the Luminant group on trying to come to an agreement. We knew it would end up costing us jobs if they didn't."

Edmonds said the union was in discussions with the company about the possibility of saving the jobs of certain workers with less than two years' seniority by offering voluntary severance to more senior workers.

For workers who opt in, the package could include a $10,000 lump sum and up to $400 for each year of their service to the company, Edmonds said.

Union member workers with less than two years' seniority with Alcoa are not eligible for supplemental unemployment benefits the company would provide to employees who have been with the company longer, he said.

-----

To see more of The Eagle or to subscribe to the newspaper, go to http://www.theeagle.com/.

Copyright (c) 2008, The Eagle, Bryan, Texas

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

NYSE:AA, NYSE:TXU,