Italy okays power decree to keep Alcoa units working

ROME, March 17 (Reuters) - Italy's parliament approved on Wednesday a power decree offering favourable conditions to some industrial consumers aimed to convince U.S. aluminum producer Alcoa Inc  to keep its Italian plants working.

In November, Alcoa said it would temporarily idle its 194,000-tonne-per-year smelters at Portovesme in Sardinia and Fusina near Venice after the European Commission ordered it to pay back most of the state aid it had received in Italy since 2006. Alcoa has complained about high power prices in Italy.

Under the new decree, power lines connecting mainland Italy with islands of Sardinia and Sicily would be upgraded and industrial consumers would get discounts on power supplies if they agree to be subject to temporary interruption of supplies.

While a move in the right direction, a spokesman for the Pittsburgh-based aluminum giant said the next step will be a ruling on the matter by the European Union.

"This is a decree for energy within Italy that is not specific to us, but would play into our situation there. There is a parallel path that is also ongoing that is part of an EU review," said Alcoa spokesman Kevin Lowery.

Alcoa agreed in late February to keep its Italian plants, which employ about 2,000 people, working for six months instead of idling them as planned after the EU ordered it to repay $300 million in state aid.

"We have already said we agreed to operate for a period of time while this review is taking place and that still stands. We knew that this review process was going on when we made that agreement. So, where it sits now is at the EU level," he said.

Alcoa, the government and other parties involved are expected to meet in April to evaluate the situation.

Alcoa argues that the penalty imposed by the EU Commission, currently under appeal, would have a "devastating impact," given the dramatic decline in aluminum prices amid the global recession.

Asked if Alcoa knew how long the EU's review process would take, Lowery said, "It's the EU's process and unfortunately we don't have a timetable."

The news drove Alcoa's stock up 85 cents, or 6.16 percent, to $14.65, on the New York Stock Exchange in afternoon trade.

(Reporting by Svetlana Kovalyova. Additional reporting by Carole Vaporean in New York; Editing by Bernard Orr)