Alcoa speaks out -- 'We're under threat':
Aluminum company wants price break for power costs
By Dan Wheat, World staff writer
WENATCHEE -- The good news is Alcoa's Wenatchee Works won't close if the Bonneville Power Administration triples its power rates. The bad news is the 49-year-old aluminum smelter will be hanging by such a thread that any economic downturn could finish it off, a top Alcoa official says.
"We're under threat," said Lloyd Jones, Alcoa president of U.S. smelting, in Wenatchee Tuesday to speak to community officials and Wenatchee Works staff and union leaders. "If Alcoa is going to stay here, we need your help."
Jones was hunting for support for an aluminum power price break from BPA, which on Monday said it may have to triple its rates because of the state's drought and the soaring cost of power it has to buy beyond what's produced at 29 hydroelectric dams.
Monday in Bellingham, Jones announced Alcoa's Intalco Works aluminum smelter there will close Oct. 1 if BPA goes through with its plans. Jones said 1,200 jobs would be lost.
Wenatchee Works, unlike Intalco, does not depend entirely on BPA power and could maintain one or two potlines on Chelan County PUD power alone for the next 10 years, Jones said. Wenatchee Works is now using two of its five potlines.
"But it would be barely viable," he said. "It leaves us very open to turning into a loss (losing) plant if economic conditions change or if water flows (for hydroelectric generation) go down in future years.
"It leaves people here very exposed. This would be the only Alcoa plant left in the Northwest and at less than 25-percent capacity."
Jones said its long-term outlook would be grim because it wouldn't be worthy of new investment. He said the plant would become "a riskier proposition" each year.
BPA officials said a tripling of rates can be avoided if aluminum smelters shut down for two years and public and private utilities reduce their BPA power purchases by 5 to 10 percent.
Jones said BPA is responding to pressure and is "cynically targeting" the aluminum industry which it views as "old and expendable." He said the industry already cut its electrical demand by 25 percent several years ago.
He called it crazy to think smelters can restart after two-year shutdowns and that experienced employees needed for safe operations would be lost to other jobs.
Jones said BPA also wants to revise rates every six months which makes smelter operations far too uncertain. "What we need from BPA is a little breathing room," he said.
Jones said Alcoa has proposed BPA set two rates but that the agency rejected the proposal. One at which smelters could buy a basic amount of power at the current $23 to $26 per megawatt hour. Additional power would cost $80 per megawatt hour or more.
Jones said Alcoa would not use the higher priced power, freeing it for other consumers. Alcoa would buy power at the lower rate to keep more Wenatchee potlines open and the plant in better position until alternative sources of power could be found. He said diesel and gas generation is too expensive.
Jones urged Wenatchee community leaders to speak up if they want to save Wenatchee Works.
"You are being pushed around by other entities who want that power," Jones told the group at the Red Lion, referring to large private utilities. "Grass roots support for the industry is what is needed. Write to your congressman, legislators and the U.S. energy secretary."
Sharon Kanareff, Alcoa's lobbyist in Olympia, said some legislators are supporting Alcoa's two-tier rate proposal and are writing to BPA. Wenatchee Mayor Dennis Johnson said the city needs to lead in telling BPA, the governor, legislators and others what Alcoa means to Wenatchee and North Central Washington. He said every Alcoa job leads to another 2.9 in the local economy.
"The city and business community supported bringing Alcoa here in the 1950s and we need to continue that support today," Johnson said, "not just for Alcoa but for ourselves." Alcoa helped build Rocky Reach Dam and is guaranteed a share of the dam's electricity.
Jim Baxter, Wenatchee Works spokesman, said the plant employs 641 employees, has an annual payroll of $42 million and made up 3.8 percent ($1.7 million) of Chelan County's tax base in 1998. He said Alcoa will cut 150 to 160 jobs through early retirements and layoffs in June.
County Assessor Russ Griffith warned that if Wenatchee Works closes, the facility's share of property taxes would shift to remaining taxpayers.
Kanareff said Gov. Gary Locke and governors from Oregon and California promoted a price cap that doesn't solve the problem because it's more than what smelters can afford.
She said Locke is now in a listening mode. She said working with his staff has been an educational process because it hasn't "understood the dynamics of what this means to business."
Wayne Pretts, president of the Wenatchee Aluminum Trades Council, said it's a sad time and that the council will do all it can to support its fellow union members in Bellingham.
Phil Rasmussen, manager of Wenatchee Works, said the plant cut $4 million in costs last year while reopening two potlines. He said it's disappointing to see that evaporate because of high power costs. The plant shut down the two potlines early this year to sell power back to BPA.
John Melton, a potline worker and vice president of the Trades Council, said morale is the lowest he's seen in 32 years at the plant.
He said he's retiring soon but that the situation is scary for young workers.
"This is a good job," Melton said. "I came right out of Wenatchee High School in 1968 and went to work right here. My dad retired from here."