BPA rate hike smaller than feared
Increase of 46 percent may allow Kaiser to restart potlines
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John Stucke - Staff writer
Kaiser Aluminum Corp. didn't flinch Friday as the Bonneville Power Administration announced a 46 percent electricity rate increase.
Instead, the company said the price hike that begins in October fell below expectations and might be affordable enough to restart some potlines at the Mead smelter.
"Now that we know what the rate is, we'll take a good long look to see if we can make it work," said Kaiser spokesman Scott Lamb. "Our strong preference all along has been to resume operations."
Kaiser is the only aluminum company in the Pacific Northwest that didn't reach a shutdown agreement with BPA.
The company has offered to remain idled through April 2002, but wants BPA to pay millions of dollars to compensate workers, offset operating losses, and ease the loss of business to Kaiser's suppliers.
BPA has not responded to Kaiser's offer.
The two sides remain locked in a months-long contract dispute.
Kaiser has been reselling its allocation of BPA power into the volatile market since last winter and stands to net up to $500 million.
BPA accuses Kaiser of failing to provide an accounting of how the company is spending the resale proceeds, and threatened to withhold electricity from Kaiser until the company shows how the money will be spent.
Regardless, BPA's new rates factor in 251 megawatts of electricity for delivery to Kaiser.
The agency provides about 40 percent of the Northwest's electricity supply from the federal government's 29 regional dams and one nuclear power plant.
During the past five years, BPA sold Kaiser electricity priced at about $23.50 a megawatt hour.
Beginning in October, the price will be $34 per megawatt hour for Kaiser, said BPA acting Administrator Steve Wright.
The 46 percent rate hike is far lower than initially feared.
In April, Wright said rates could climb 250 percent, more than tripling prices.
Such an increase would have devastated broad segments of the region's economy and erased any notion of smelting aluminum for as long as two years.
In response, every aluminum company but Kaiser struck shutdown deals with BPA. The agency agreed to pay aluminum workers' wages to ease the economic hit to smelter communities and keep work forces intact.
On Friday, Wright said the 46 percent rate increase represented a victory of sorts.
"Although the region has substantially reduced its exposure to the market, we recognize that the rate increase is still a steep one," Wright said.
The federal agency will revisit rates every six months to ensure they cover Bonneville's costs without gouging regional consumers.
With BPA power prices climbing 46 percent, however, Lamb said Kaiser may be able to use some of its resale proceeds to offset the new, higher prices.
The decision depends on the price aluminum fetches on the commodities market, along with the costs of such things as labor and raw materials.
Kaiser's decision also is driven by the need to feed its Trentwood rolling mill.
Mead had supplied the mill with aluminum until last year, when Kaiser determined it could make more money reselling electricity than making metal.
Lamb said supplying Trentwood with an outside source of aluminum has been more difficult and costly, partly due to freight charges.