Kaiser revenue-sharing deal is stingy, BPA says
By Hal Bernton
Seattle Times staff reporter
Kaiser Aluminum is willing to share with Northwest ratepayers $10 million of an estimated $300 million to $500 million expected from the resale of public power, an amount Bonneville Power Administration officials say falls far short of a fair deal.
BPA officials say they have tried — and failed — to gain a bigger cut of the sales, but Kaiser recently rejected an agency proposal.
"That is what finally made clear to us that good-faith negotiations were over," wrote BPA official Paul Norman in a letter sent Thursday to Kaiser.
Kaiser Vice President Pete Forsyth said yesterday he had yet to see the BPA letter.
He said the company has tried to negotiate in good faith and is willing to resume discussions.
The standoff reflects an increasingly bitter and high-stakes battle between the giant federal hydropower marketer and one of its biggest customers.
BPA is hungry for revenue to help shore up its shaky finances triggered by the need to buy power on spot markets, where prices have skyrocketed during the energy crunch.
It's managed to convince two other aluminum companies — Columbia Falls Aluminum and Golden Northwest Aluminum — to share from 25 to 30 percent of resale revenues with ratepayers.
BPA hoped for a similar deal with Kaiser, and Norman's letter, which accused Kaiser of reaping windfall profits, reflected BPA's increasing frustration.
Kaiser is expected to garner its huge resale revenue by Sept. 30.
If a new revenue-sharing agreement cannot be worked out, BPA officials say they will reduce or cut off the company's power supply after Sept. 30.
Forsyth said the company was not making windfall profits, and has higher fixed costs than the two aluminum companies that agreed to share more of the revenue.
Power-sale proceeds are being used to cover fixed costs and future power purchases, and the company also is negotiating with the United Steelworkers of America over a compensation package for idled workers, according to Kaiser officials.
Kaiser has laid off more than 1,200 workers at plants in Tacoma and Spokane as high energy costs have made it unprofitable to produce aluminum.
Rate increases proposed by BPA may make it impossible to resume operations, Forsyth added.
"We're seeing these huge increases of power (rates) that nobody ever anticipated," said Forsyth. "We've got to find some way to mitigate those impacts."
Forsyth said his company had often resold power for use in the region for less than full market prices.