Kaiser to pay full wages in layoffs

Company to sell more power back to BPA in January

John Stucke - Staff writer

With pressure mounting to share the wealth, Kaiser Aluminum Corp. agreed to pay most of its laid-off Steelworkers full wages as it sells massive amounts of electricity into a lucrative power market.

The company announced Friday that it will net $36 million in January by selling 191 megawatts of electricity. It's the second time in a week that Kaiser has resold a month's worth of its precious power supplied by the federal Bonneville Power Administration.

Last Sunday, Kaiser decided to shut down its Mead smelter for 10 months and lay off 400 workers. At the same time, the company reported it had sold its remaining supply of December electricity and stood to net $52 million.

In November, for the first time, the company sold some of its BPA power, limiting production at the Mead plant and putting 145 employees out of work.

The sales reflect an economic truth in the Northwest's unsettled electricity market: Aluminum companies stand to make much more money selling electricity than making metal.

The sales brought a hail of criticism. Kaiser's financial gain, some argued, was the Northwest's loss. The company was accused of profiteering while its laid-off workers -- who were to get 70 percent of their normal pay -- suffered and the region scrambled to avoid blackouts from energy shortages.

After weathering complaints from federal Energy Secretary Bill Richardson, Washington Gov. Gary Locke, U.S. Sen. Patty Murray and Sen.-elect Maria Cantwell, Kaiser announced a negotiated deal with Steelworkers to pay full wages to all employees affected by the power sales through January.

Full pay after January will depend on Kaiser's profits from further electricity sales.

Relief among the Steelworkers' ranks followed.

"It's better than a kick in the pants," said Dan Russell, president of Steelworkers Local 329. "I don't know what prompted it, maybe a combination of some things like the pressure they were feeling.

"Whatever, this helps get us through Christmas."

Steelworkers laid off from the smelter during the past month will receive full medical and dental benefits.

In addition, Kaiser announced Friday that Steelworkers who were not recalled to work after a two-year labor dispute ended in October will receive a $1,000 Christmas check. Those former workers include some from Mead with little seniority and those at a Tacoma smelter that closed in June.

Bonneville Power Administration spokesman Ed Mosey called the Kaiser wage plan a good start.

"This is a good down payment on what Kaiser will be asked to do," he said. "When you get a couple of pretty blunt statements from the governor of Washington, and the federal energy secretary gets involved, it behooves them to cooperate."

Kaiser spokeswoman Susan Ashe said the 70 percent wage agreement announced Sunday was mandated by the company's union contract.

"Our initial offer was all we could offer without further discussion," she said. "We certainly understand the interest of the region on this issue, and it was always our intention to mitigate the impacts on employees."

Kaiser paid BPA about $23.50 a megawatt hour for the electricity under the terms of a contract signed five years ago. It sold it back to BPA for about $280 a megawatt hour, said Kaiser spokeswoman Susan Ashe. That's well below the going market price of about $550 to $600.

A megawatt is enough to power 600 homes. A megawatt hour is the amount of energy those same homes use in a single hour.

Ashe said reselling the power at below the market value shows Kaiser's willingness to help ease Northwest power worries while not pressing for too high a price.

"This is a real benefit to the region," she said.

Had Kaiser sold the power back to BPA for the going rate, the federal agency would have had to recover those costs, she said.

BPA said the repurchase from Kaiser at $280 a megawatt hour, compared with the going market rate, actually saved regional ratepayers about $25 million.

Steve Wright, BPA's acting administrator, said Kaiser actions set the right tone.

"This is an important first step leading to future agreements on how Kaiser will share the benefits of reselling low-cost federal power in today's market," he said.

The resale of its BPA electricity supply puts Kaiser in better shape to resume operations next October. That's when a new five-year deal with BPA begins. The deal calls for BPA to sell less power to Kaiser and charge about a third more for it.

Ashe said that new contract, providing 40 percent of the electricity Kaiser needs to run at full strength, has the company worried.

Until 1996, BPA supplied 100 percent of Kaiser's power needs. For the past five years it has been 60 percent.

Ashe said Kaiser will use some of its windfall from BPA power sales -- so far the company has netted $135million in three different deals -- to offset the expected higher costs in coming years.

Exactly how to use the money, however, is still being debated.

The company is investigating the feasibility of generating its own power, she said. But the overall uncertainty of the aluminum industry's future in the Northwest needs to be grounded first.

"We've always believed the fundamentals exist for this company to be here long-term," Ashe said. "But we still have worries beyond 2006 (when the company's next contract with BPA will be negotiated)."