Alcoa, PUD: Plan rescues plant
Alcoa and Chelan County PUD officials unveiled what they see as a rescue plan for Wenatchee Works plant, above, that will save 400 jobs. Alcoa Wenatchee Works Manager Phil Rasmussen, top left, listens to the PUD's Roger Braden at a press conference Wednesday at the plant.
World photo/Don SeabrookBy Laurie Smith World staff writer
MALAGA -- Alcoa and Chelan County PUD officials say they'll use the high electricity prices that nearly killed the aluminum industry in the Pacific Northwest to rescue the Wenatchee Works plant.
Officials said Wednesday they plan to stop producing aluminum at the plant for 15 months. The PUD would sell Alcoa's share of county power on the open market, hoping to make $150 million to develop a new energy source for the smelter.
At least 400 people will remain employed at Alcoa's Wenatchee Works during the shutdown.
"We think this is a remarkable arrangement where almost everyone is better off than before," said Alcoa's U.S. Smelting president, Lloyd Jones, in what he called an "exciting, forward-looking announcement."
Unfortunately, he said, about 80 employees with less than two years' seniority will lose their jobs when the last of the smelter's potlines go down on June 30.
The layoffs will include about 40 people who were sent home with full pay three months ago, Wenatchee Works Manager Phil Rasmussen said. People who are let go will receive $10,000 payments to soften the blow, said Jones. In addition, the company will offer a second round of early retirement packages like the ones accepted recently by 58 senior employees.
Until recent months, the plant had 641 employees and an annual payroll of $42 million.
Jones and Rasmussen, along with Wenatchee Aluminum Trades Council President Wayne Pretts and PUD General Manager Roger Braden, spoke Wednesday to several dozen people at a news conference in the smelter's administration building.
Despite the downsizing, Pretts called Wednesday's announcement the best news local aluminum workers have had in a long time because it promises to secure living-wage jobs. "It's going to take care of the employees and the community," he said.
Contrary to the headline in Wednesday's Wenatchee World, Rasmussen said, the plant isn't closing. During the down time, workers will be engaged in refurbishing the plant, upgrading equipment, electrode manufacturing, training and community service projects, officials said. Alcoa may also use a supply of cold metal to operate a particle-casting machine, Rasmussen said. The M&M-sized pieces are used in magnesium manufacturing and petroleum purification.
A 66-page proposed agreement, which comes before PUD commissioners for final approval on June 26, lays the groundwork for developments that could make the Wenatchee Works "the leading aluminum production facility in the Northwest," PUD General Manager Roger Braden said.
"It's going to, I believe, provide an opportunity for this plant to stay economically viable till 2036 -- 35 years from now," he said.
By taking Alcoa's 23 percent of the output from Rocky Reach Dam and selling it at market prices, the PUD will both provide the Northwest with power in a time of need and support local employment, Braden noted. At $10 to $13 per megawatt-hour, he said, the Rocky Reach power is "one of the lowest-cost energy resources in the world." Shutting down the Wenatchee potlines will free up 150 to 200 megawatts.
Officials said they hope power prices stay high so the PUD can earn enough money to compensate workers and build or acquire an energy source for Alcoa.
On Wednesday, market prices were well off their highs for this year at about $50 per megawatt-hour, apparently because of mild weather.
But given the drought, Jones said, "the fundamentals are still saying that power prices are going to be high."
Regardless of whether the power sales yield a large return, workers are assured of being paid at their normal base wage rates for 40 hours a week, Jones said. If electricity prices plunged, he said, the plant would resume aluminum production and "go back to things as they were" before the shutdown.
The plant is currently operating 1.6 lines, less than one-third of capacity.
According to Jones and others, it is the last of 10 Northwest aluminum smelters to stop production because of the energy shortage.
In addition to its share of Rocky Reach, the Wenatchee Works has relied on federal energy from the Bonneville Power Administration since the smelter was built almost 50 years ago. The BPA has bought back the allocation for up to two years and will no longer serve the plant after June 30.
Officials were asked Wednesday what the PUD power sales and development plans will mean for Alcoa's relationship with Bonneville.
"Who?" Braden said, eliciting laughter.
Under its agreement with Alcoa, the PUD would seek to develop or acquire 260 additional megawatts for the smelter. PUD officials hope to raise $150 million for that purpose. Natural gas-fired turbines are one option, but it's doubtful that one would be built locally because the area lacks the pipeline capacity to support it, Jones said.
Meeting in special session Wednesday, PUD commissioners voted to take up the agreement, then tabled it for 10 days as required by law.
The proposed contract resulted from several full days of meetings over the past three or four weeks, some of which ran late into the evening. The discussions were always cordial, though complex and difficult, Jones said.
On one occasion, Alcoa's attorney participated for five hours by telephone from London. "You can imagine what that was like," Jones said.
"I'm very proud to be a part of this, because I think it's really good for the valley," said Jack Speer of East Wenatchee, who helped negotiate the deal as Alcoa's Northwest power manager. "I can look my neighbors in the face and say I worked very hard."
