BPA wants cut from Kaiser
POWER PLAY: Aluminum company making windfall selling electricity it is buying under contract from BPA
02/17/2001
Al Gibbs; The News Tribune
Kaiser Aluminum and Chemical Corp. is doing its part to ship millions of Northwest power dollars outside the region.
The company, which has shut down its aluminum smelters in Tacoma and Spokane since energy prices spiked last summer, could make as much as $500 million selling power it is buying under contract with the Bonneville Power Administration for $23.50 a megawatt hour at market prices that can average nearly 20 times that much.
Most of the money is going to Kaiser headquarters in Oakland or to Houston, home of Maxxam, which owns 63 percent of Kaiser.
But Bonneville wants part of that windfall.
"We're looking for 25 percent," said Bonneville spokesman Ed Mosey.
Two other big aluminum companies - Golden Northwest and Columbia Falls Aluminum Co. - have agreed to contribute up to 30 percent of the extra revenue they're collecting by selling power they buy from Bonneville at much higher prices.
Kaiser contends it will only make $300 million - not $500 million - by next Oct. 1, and that power it has sold back to Bonneville at less than market rates should count toward helping Northwest ratepayers.
"We think there are plenty of discounts we're providing," said Pete Forsyth, Kaiser regional vice president of external affairs.
Bonneville disputes that.
"I'm not sure we saved much, if anything," said Paul Norman, a Bonneville senior vice president.
Norman concedes that while Kaiser's contract with the federal power marketing agency requires it to use some of the windfall to help laid-off Kaiser workers and to help the company purchase power under a new contract that begins Oct. 1, the existing contract doesn't force Kaiser to share its unexpected wealth with Bonneville.
Efforts to negotiate just such an agreement broke down a few weeks ago. Kaiser had offered $10 million.
Bonneville is not without muscle of its own.
"The option we have is to reduce or eliminate service under the new contract," Mosey said.
Kaiser is selling power - 180 to 190 megawatts generated at the region's hydroelectric dams and one nuclear plant - mostly in the region, Forsyth said.
"We're very aware some has gone to utilities in the region," Forsyth said. "But I can't guarantee that every kilowatt stayed in the region."
Forsyth contends Bonneville public relations efforts to dramatize the issue is "a gross end run about how much our company is sharing or not sharing."
Kaiser in recent days has mounted its own public relations campaign with radio ads that say, in part:
"Kaiser is acting in the public interest by volunteering to sell the federal power we bought years ago to operate our facilities. Our plants are closed because the region needs our electricity. We're glad to help keep the lights on at home. All we expect in return is enough money to take care of our workers, and to keep our company healthy so eventually we can get back to our job making aluminum."
But even Forsyth says the company may not be able to operate its mills profitably after Oct. 1, when its new contract with Bonneville takes effect.
Bonneville then would sell power to Kaiser for about $26 a megawatt hour but might tack on a surcharge that could nearly double the price.
That price "would make it damn near impossible for plants to operate," Forsyth said.
And some sort of settlement with Bonneville still may be possible.
"The issue is: Bonneville asked for cash. We need cash, too," Forsyth said.
"Can we find a happy medium? There's phone dialog under way."