THE ENERGY CRUNCH: ALUMINUM FIRMS' CAMPAIGN CRITICIZED
Wednesday, April 25, 2001
By THOMAS RYLL, Columbian staff writer
Clark Public Utilities commissioners and administrators on Tuesday lashed out at the political maneuvering by aluminum companies trying to avoid huge power increases later this year.
Those power increases -- the same hikes that will face millions of Pacific Northwest residents and businesses -- could force electricity-hungry aluminum plants out of business.
But cutting a deal for them could mean disaster for many more companies, say utility officials.
"We're going to devastate the economy of the Northwest to save the aluminum companies," said Jim Sanders, Clark's director of energy resources. "This is shifting $2 billion in costs from the aluminum companies to residents and businesses of the Northwest."
The aluminum industry's ravenous need for power has made it a target of the Bonneville Power Administration's effort to reduce what could be 300 percent rate increases in October.
Acting BPA Administrator Steve Wright has proposed that negotiated aluminum production cutbacks, with compensation for idled employees, be used in part to make up a 3,000-megawatt electricity shortage faced by the agency.
Those cutbacks, along with conservation by other users, could slash a 300 percent rate increase by two-thirds, Wright has said.
Enriched by power deals that include a $63 million sale to Clark Public Utilities earlier this year, aluminum companies have mounted a campaign to bring politicians and public opinion into their camp.
The newly formed Northwest Power Alliance has been blitzing the media with faxes promoting, among other things, a rally today in Seattle "to protest a federal Bonneville Power Administration plan to eliminate the industry."
In a Monday press release, the alliance said a bipartisan group of Washington legislators has urged the BPA to protect the aluminum industry, so that it "not be sacrificed for the benefit of other power users."
"Survival" might better be substituted for "benefit," judging by comments of Clark Public Utilities commissioners and officials at Tuesday's meeting.
Nancy Barnes, commission president, wondered if the legislators, including several from Clark County, understood the impact of aluminum industry protection when they signed the letter to the BPA.
The aluminum industry wants a "conservation incentive rate" that would allow consumers to consume 75 percent of their current usage at a low cost. That figure represents the Bonneville Power Administration's low-cost assets -- hydropower. Beyond that the rate would jump sharply, in line with the huge cost the BPA pays to acquire nonhydro power and serve the agency's customer base.
(The aluminum industry says the BPA blundered by "overcommitting" its power supply "to sell power to California, including San Francisco's rapid transit system.")
But aluminum producers can easily scale back operations, as electricity is a massive expense of producing the metal, said Wayne Nelson, Clark's general manager.
For many other businesses and residential consumers, a 25 percent cut is huge. "I don't know how you'd tell a store, 'You can operate just three-fourths of your business,'" said commissioner Jane Van Dyke.
The power alliance says the Northwest aluminum industry has 7,500 employees earning an average wage of $58,000 a year.
The industry, the alliance says, needs "only" 1,500 megawatts of electricity. That is more power than consumed by all of Seattle.
Among Clark Public Utilities customers, the largest industrial customer is SEH America, which makes silicon wafers. Last year, SEH used 239 million kilowatt-hours of electricity, and provided about 1,600 jobs.
When Vanalco, formerly Alcoa, was operating its aluminum smelter here, its annual power consumption was about 2 billion kilowatt-hours, for about 600 jobs.
Thus, in Clark County, manufacturing aluminum, compared to silicon wafers at SEH, took more than 80 times the electricity -- for about one-third the jobs.
Last week, U.S. Rep. Peter DeFazio, D-Ore., decried the "obscene profits" being made by aluminum companies that are remarketing power from their low-priced BPA contracts. The industry has made $1.4 billion with such deals.
Clark County residents will be helping to enrich one aluminum producer. Earlier this year, Clark Public Utilities agreed to pay Kaiser Aluminum $325 a megawatt-hour for a block of power in August and September.
That price is more than 10 times what Kaiser will pay the BPA, and vastly more money than the company could make smelting aluminum. It is also the highest price, by far, that Clark has ever had to pay for power.
Now, said Sanders, "They want a special deal where they pay the low rate."