Copy of letter sent to BPA

 

 

March 26, 2001


Manager, Corporate Communications - CK
Bonneville Power Administration
P.O. Box 12999
Portland, OR 97212

Dear Manager:

We write in response to Acting Administrator Stephen J. Wright's letter to Customers and Citizens of the Pacific Northwest dated January 25,
2001.

The current crisis in West Coast power markets has impacted many BPA constituents, however, low-income ratepayers, workers reliant on energy-intensive industries and salmon populations have been particularly adversely affected. We the undersigned have forged a consensus around the need to radically rethink the manner in which the Direct Service Industry aluminum smelters utilize BPA energy. We believe that out of this crisis we can develop new and innovative solutions to save jobs, protect the environment and ratepayers, and improve the long-term social and environmental health of the Pacific Northwest.

The following measures are designed to bring about voluntary reductions
in energy use (thus mitigating overall ratepayer increases) and lead to complete aluminum smelter DSI energy self-sufficiency by the year 2006.

THE 2001-2006 PROPOSED RATE STRUCTURE

Over the past six months, certain DSI customers took advantage of remarketing rights in their 1996-2001 contracts, reducing their load and reselling their power to BPA. One of these companies, Golden Northwest Aluminum, has collaborated with the BPA, ratepayers and its union, the United Steelworkers of America by: 1) sharing remarketing proceeds with ratepayers; 2) keeping employees fully compensated; 3) guaranteeing that its share of proceeds would be invested in the development of new power resources, including significant renewables; and 4) agreeing to achieve energy self-sufficiency by 2006.

Another company, Columbia Falls Aluminum Company, has agreed to keep its employees whole and use the balance of its proceeds, after curtailment,
to buy down its power costs in 2001-2006. The third company with remarketing rights, Kaiser Aluminum, has refused to reach agreement with BPA and USWA and has likewise refused to invest any of its estimated $400-500 million windfall in new power generation.

In the new subscription period, 2001-2006, we believe that the model created at Golden Northwest Aluminum, combined with a two-tiered rate structure, is the best and fairest method of mitigating rate increases for residential customers, while retaining the critically-important, good-paying jobs that the aluminum DSIs provide. This approach would also help to address BPA's current estimated 3,000 megawatt shortfall, resulting from its 11,000 megawatts of contractual obligations contrasted with its 8,000 megawatts of reliable supply.

Specifically, we would propose the following:

• Every BPA customer (including DSIs, IOUs, & PUDs) would receive 8/11ths, or 73% of power allocated for the 2001- 2006 period at the original rate of approximately $23.50 per MgW/H.

 

• Additional power requirements would be sold to these customers at market rates, thus providing an incentive for conservation measures. Rate cap protections would be put in place to prevent negative financial effects on low-income residential consumers.

 

• Individual aluminum DSIs would only be eligible to participate in the 2001-2006 two-tiered structure under their commitment to the following conditions:
• Complete energy self-sufficiency by 2006.

 

• Development of new, environmentally sound energy generation, with significant reliance on renewable resources, such as wind power. Strict and expedited siting criteria and technological provisions must be followed to mitigate harmful effects to wildlife and the environment. (As part of this program, we would recommend that BPA use its credit to guarantee loans made to appropriate projects.)

 

• Provisions reasonably acceptable to the affected union that would mitigate any negative impact on workers during this period.

 

• Any aluminum DSI unwilling to participate in the two-tiered rate would be offered its 2001-2006 subscription load at a melded rate determined through the proposed CRAC provisions.

The proposed structure would reduce power consumption by the DSIs, thus increasing the power supply and lowering rate increases for all other customers. It would reward conservation measures throughout the system. The pressure on the hydro system would be greatly reduced, thus protecting, rather than destroying threatened and endangered species of salmon and trout.

ADDITIONAL TEMPORARY DSI ALUMINUM SMELTER CURTAILMENTS

The issue of temporary curtailments of aluminum DSIs after October 1, 2001 should be individually negotiated between the BPA, the DSIs and the USWA or other affected unions. In some cases, limited smelter operations are essential to long-term company survival. In other cases, additional curtailment is a sensible step in near-term regional power conservation efforts when coupled with aluminum company investment in new energy investments. During periods of high electricity prices, the interests of other customers should be kept in mind. In all cases, worker protections must be guaranteed.

We recommend a comprehensive plan that:

• Keeps displaced workers whole, including payment of full salaries, benefits, and continuous pension coverage in the case of temporary layoffs;

 

• Provides genuine retraining for comparable family-wage jobs in the region or nearby region;

 

• Diversifies jobs and keeps them in the Northwest;

 

• Provides employment counseling and development to help direct former aluminum workers into new jobs that come on line related to the development of new energy production;

 

• Offers early retirement options for both hourly and salaried employees 55 years or older;

 

• Provides small business loans for individuals interested in entrepreneurial ventures.

No proceeds of post-October 1, 2001 power resales resulting from remarketing should be shared with aluminum companies unless such companies have demonstrated an effective strategy for long-term job retention and a transition to alternative, environmentally sound energy sources consistent with maintaining viable businesses.

CONSERVATION

With our proposed structure, all BPA customers will only be entitled to 8/11ths, or 73% of their allotment at the lower rate. In order to maintain operations at this lower level of energy consumption, conservation efforts must be made by everyone. We endorse the following energy efficiency measures and urge their adoption:

• Restoration of funding from outside sources for conservation programs at BPA to at least 1995 levels of $122.6 million;

 

• Energy efficiency standards for aluminum companies that encourage the transition of their plants to newer and more efficient technologies;

 

• Strict building codes on buildings (including energy-efficient lighting in commercial buildings, improved lighting designs in new and renovated buildings, high appliance standards, upgrades of heating equipment and air conditioners);

 

• Public education about basic conservation practices, such as replacement of incandescent lights with fluorescent light bulbs;

 

• Subsidies for energy efficient appliances (washers, dryers, refrigerators and air conditioners);

 

• Tune-ups and repairs of existing home air conditioners;

 

• Investments in renewable energy, including wind, solar, geothermal, and fuel cells;

 

• Innovative measures such as vending machine energy "misers" and monitors on water heaters.

ENVIRONMENTAL ISSUES

Some have suggested that the loss of aluminum smelting in the region should be permitted to occur. We reject this approach. If aluminum smelting leaves the Pacific Northwest it will likely move to less developed countries where lower environmental and labor standards and far fewer environmental regulations exist. With a movement toward safer, cleaner energy production, it makes far more sense to retain these jobs in the United States.

CONCLUSION

We believe that the recommendations laid out above provide the basis for an economically and environmentally sound approach to our current dilemmas. We have come together in the hope that out of this crisis can come a new consensus based on Bonneville's historic mission of promoting sound economic development.

Thank you very much for your consideration.

Sincerely,

David A. Foster, Director
District 11
United Steelworkers of America, AFL-CIO

Tim Nesbitt, President
Oregon AFL-CIO

Rick Bender, President
Washington State Labor Council, AFL-CIO

Al Link, Executive Secretary-Treasurer
Washington State Labor Council, AFL-CIO