Kaiser Aluminum official denies BPA stalemate
Saturday, February 3, 2001
THE ASSOCIATED PRESS
SPOKANE -- A Kaiser Aluminum Corp. official denied that the company is at impasse in negotiations for sharing some of the millions of dollars it is making by selling federal electricity, rather than producing metal.
Kaiser Vice President Pete Forsyth said the company has made an offer to the Bonneville Power Administration that is equal to one-third the value of profits the company will make from remarketing the federal power that Kaiser gets under a contract with BPA.
The company has no contractual obligation to share its power sale profits, Forsyth added.
BPA spokesman Ed Mosey said this week that the company stands to make $500 million from selling power through Oct. 1, when a new five-year contract takes effect.
"It's hard for us to conceive how they cannot share a part of that half-billion dollars with the region's ratepayers, pay their employees, pay any costs associated with their plant curtailments and invest in the future of their operations," Mosey said.
On Wednesday, Mosey said BPA and Kaiser were at impasse in revenue-sharing talks. But Forsyth said Thursday: "We're not saying there's an impasse."
Kaiser will continue to negotiate with BPA until a new power contract takes effect, he said.
Forsyth said BPA is taking a short view on the power sales revenues when it should be concerned about the health of the aluminum industry and other major customers over the long run.
"It really does trouble us ... that Bonneville has gone public on these discussions without trying to zero in on what the power outlook is in the next five years," Forsyth said.
Since 1996, Kaiser has paid BPA $22.50 a megawatt hour for electricity. The contract contains a clause that allows the company to remarket the power it doesn't use.
The current market rate for wholesale electricity is about $355 a megawatt hour.
Late last year, Kaiser shut down its Tacoma and Spokane smelters and laid off more than 600 employees, in part because it could make more money selling its federal power allotment than producing aluminum.
Other aluminum smelters in the region have followed suit and several have agreed to share 25 percent of their power sales revenues with BPA.
New five-year contracts that take effect Oct. 1 do not allow resale of power, and make less power available to smelters at prices more than double current prices.
Forsyth said the new contracts have been signed, but BPA won't say until May what the electricity will cost. Estimates are between $35 and $49 a megawatt hour.
BPA, which sells power from 29 regional federal dams and a nuclear plant, is facing a 1,000-megawatt shortfall and the prospect of buying expensive power on the open market to meet demand.
Last week, BPA said wholesale prices could increase by 60 percent over five years, including a 98 percent increase in the first two years of the contract, Forsyth said.
"We're a little bit befuddled as to why so much attention has been placed on sharing revenues, when our power sales don't come near the higher power costs Bonneville has proposed," he said. "From our perspective, we need some certainty on prices before we can tell Bonneville what we are able to share."
Forsyth said Kaiser is banking some of the power sales revenues to pay the higher BPA costs, salaries and benefits of laid off smelter employees, and costs associated with buying aluminum on the open market to keep its Trentwood rolling mill operating.
Mosey said it will cost BPA an additional $160 million to buy power on the open market to keep Kaiser's plants operating after Oct. 1.
"We recognize that these are very hard times for all industries in the Northwest," he said.