House GOP seeks better deal for smelters
This story was published 4/20/2001
By Chris Mulick
Tri-City Herald Olympia bureau
OLYMPIA -- Republicans in the state House of Representatives signed a letter sent to the Bonneville Power Administration last week demanding a better deal for Washington's aluminum smelters receiving BPA power.
Richland Rep. Jerome Delvin was the only dissenter in the 49-member caucus. He's been exchanging letters with Steve Wright, BPA's acting administrator, voicing concerns that giving benefits to the aluminum companies would only push rates higher for customers of public utilities.
"If they're going to sell to the (aluminum companies), they should sell it to them at market rates," Delvin said of Bonneville.
State lawmakers, many of whom appear to be struggling to pick up the finer points of the complex energy industry, have been largely mum on the contentious and politically difficult issue. Instead, they've devoted most of their focus on energy issues to talking about wholesale price caps, regulatory reforms and tax breaks for generators -- measures analysts agree would be of little consequence.
But 48 House Republicans quietly circulated and signed a letter dated April 10 and sent it to Wright, asking he give the aluminum companies greater consideration as BPA divvies up its supply of cheap electricity.
The agency will be cementing new contracts this summer that will take effect Oct. 1 and everyone is clamoring at its door. That includes public utilities, which by law get first dibs, private utilities, which have a lesser legal claim and aluminum companies.
The agency is not required to sell a single megawatt of the cheap energy it generates at federal dams to any of Washington's smelters but does because it employs about 7,500 workers when in full operation.
If things don't change, it appears the agency will have to raise rates high enough to easily double bills for thousands of homeowners and businesses in the Northwest.
That's because the agency is oversubscribed.
It has 8,000 megawatts of energy to sell but has inked contracts to provide 11,000 megawatts. It will pay dearly to acquire the additional 3,000 megawatts, twice what the aluminum companies have been promised, and will have to pass those additional costs onto consumers.
Bonneville is hoping to limit its exposure to the market by asking its so-called "direct service" industrial customers to shut down for two years and sell their power back at prices only high enough to provide wages for idled workers. BPA figures aluminum smelters in Spokane, Wenatchee, Longview, Vancouver, Ferndale, Tacoma and Goldendale won't be able to operate profitably anyway at the jacked up rates the agency would have to offer them otherwise.
If the companies agreed, it would lower rate increases for customers of public utilities, such as the ones serving the Tri-Cities. But the companies say that plan still would drive them out of business, in part, because workers would find other jobs.
That "conservation incentive rate" backed by the companies and now 48 House Republicans, would set up a tiered approach in which all customers would get their share of the 8,000 available megawatts at the inexpensive cost of production.
They would then pay whatever it takes for Bonneville to obtain the rest.
Public utilities already are being asked to reduce their demand on Bonneville by 5 percent. And if the aluminum companies get the cut they want, some fear it will drive public utility rates high enough to begin jeopardizing the viability of the companies they serve. That puts hundreds of thousands of workers at risk, said Steve Johnson, director of the Washington Public Utility District Association.
"This region can't afford to provide them that resource below the cost of production," he said of the aluminum companies craving for Bonneville power. "That's what they're asking."
Further, public power backers say, aluminum companies could just curtail operations so they never have to pay more than the cheap Bonneville rate. But utilities can't simply turn the lights out on randomly selected street blocks.
"That's a great academic exercise, but it ignores the fact you've got thousands of jobs at stake here," said John Arthur Wilson, a spokesman for the Northwest Power Alliance, a coalition of interests backing the industrial customers.
Rep. Shirley Hankins, R-Richland, said she also wants to protect the aluminum industry jobs. She and many of her colleagues signed the letter even though their districts are largely served by public utilities and aren't home to any of the aluminum companies.
"I shouldn't be talking about this because I haven't studied it," Hankins said.
Johnson said the PUD Association has been sending letters to Olympia trying to provide lawmakers with their side of the story, which he said was lacking.
Already, it's having an effect, Delvin said.
"Now, people are asking questions maybe they should have asked before they signed the letter," he said.