CFAC, BPA swing deal
By RICHARD HANNERS
Hungry Horse News
The power brokering between the Columbia Falls Aluminum Company and the Bonneville Power Administration continues with a deal struck Monday that will pay wages and benefits for plant employees and possibly keep some aluminum production at the plant in the years ahead.
CFAC and BPA announced an agreement that provides power for one potline, or 20 percent of capacity, by October 1, 2002 and two-and-a-half potlines, or half its capacity, by October 1, 2003.
The company had hoped to start up half its plant in January next year, but wholesale power prices continue to be too high, and the restart won't happen.
CFAC's current five-year contract obligates BPA to provide the aluminum plant with 171 megawatts of power from January 1, 2002 through September 30, 2006.
The new agreement applies to that contract. BPA will pay CFAC $19.50 per megawatt hour through October 1, 2003 for unused contracted power.
The plant uses four megawatts now to keep lights on and allow for maintenance and capital improvement projects. In the new agreement, the plant will sell 167 megawatts for the first nine months of 2002 and receive about $21.1 million from BPA.
With one potline running starting October 1, 2002, the plant will sell 100 megawatts for 12 months and receive about $16.8 million. After October 1, 2003 the company hopes to be running the plant at 50 percent of capacity.
Money from the sale of unused contracted power will be used to compensate the 300-plus employees still working at the plant. Employees laid off earlier this year will not benefit from the new deal.
But whether the plant will fire up any potlines next October depends upon BPA's power prices and international aluminum prices, said CFAC plant manager Steve Knight. BPA prices are announced in six-month intervals, he said.
There is no provision in CFAC's deal with BPA for local taxes. Last year CFAC paid $1.5 million in local taxes, said Flathead County Treasurer Patty Arnold.
In a deal struck last week with Alcoa's Intalco plant in Ferndale, Wash., BPA provided $1.75 million for local taxes in addition to buying the plant's power for two years.
Knight said the big issue facing the plant was organizational and people-oriented. Employee morale needed a boost, and the workers needed to get back to making aluminum. The longer the plant stayed closed, the harder it would be to restart, he said.
He also said the plant needed to get back in operation to improve its market position. He cited an article in the May 21 Wall Street Journal portraying a weak Pacific Northwest aluminum industry. Knight said CFAC needed to separate itself from that image.
Employees will continue training and improvement projects through this year and most of next year, Knight said. This would include projects that are labor intensive or that can not be easily done while the plant is operating, as well as community service projects.
Jim Stromberg, CFAC's power manager, said forward power prices were still too high at this time for the company to expect coming back on line at 50 percent. He said he had seen forward prices of $100 per megawatt hour for 2002 and $60 for 2003. Stromberg has said in the past that prices need to be below $30 in order for CFAC to operate profitably.
Stromberg stressed that California needed to solve its power market problems in order for West Coast wholesale power prices to come back down and stabilize New generating plants and transmission systems needed to be built, he said, but he warned that some projects announced in the media may never materialize.
CFAC competes in the international aluminum industry, Stromberg said, and power prices in other aluminum producing nations could be significantly lower. He said aluminum plants in Quebec paid only $9 per megawatt hour, and aluminum plants in the former Soviet Union did not pay power bills for a year.
Stromberg said no arrangements had been made for power after 2006, but now was a good time to be looking. CFAC's January 18, 2001 remarketing agreement states that the company gives up its right to federal power after 2006.