Kaiser awaits claim ruling
Energy buyers say firm took advantage of market in pricing power
September 22, 2001
Liz Skinner; Bloomberg News
WASHINGTON, D.C. - Kaiser Aluminum Corp. may have to repay some of the $60 million it collected from selling electricity to Clark County, Wash., last winter when the third-biggest U.S. aluminum maker decided it could make more money selling power than metals.
The Houston-based company in December shut its smelter in Mead, near Spokane, and began selling power it had contracted to buy from the Bonneville Power Administration at $22.60 a megawatt- hour. A megawatt is enough to power about 750 California homes.
Clark Public Utilities said the $325 per megawatt-hour it paid was in line with market prices. The county argues, though, that Kaiser took advantage of the region's dysfunctional power market. A judge in Washington, D.C., is set to tell Clark and other Northwest power buyers on Monday whether Kaiser Aluminum and dozens of other power sellers may owe refunds.
"Any kind of claim for a refund simply has no merit," Kaiser Aluminum spokesman Scott Lamb said.
Power buyers, including Seattle and Tacoma, say their bills were inflated by an electricity shortage in California, where prices rose fourfold. They are seeking a total of about $2 billion in refunds.
Clark County was a willing buyer participating in a competitive market, Lamb said. At the time of the sale, one commissioner said she was "pleased to have negotiated such a reasonable price," he said.
Clark Public Utilities, which supplies power to 153,000 customers in and around Vancouver, doesn't deny it willingly paid $325 per megawatt-hour. Of the $64 million the company paid, $4 million went to the Bonneville Power Administration.
Clark said it signed a contract to buy power Feb. 2 for delivery Aug. 1 through Sept. 30. "At that time the market was predicting prices of $1,200 per megawatt-hour by August," said Mick Shutt, a Clark spokesman. "It was perceived to be a good deal."
The region's wholesale power prices have dropped dramatically, though, since the U.S. Federal Energy Regulatory Commission set price limits for California on April 25. The average price for a megawatt-hour at the California-Oregon border in August was $44.48, down from $313.70 in April. FERC expanded its price-control plan to include 10 other Western states in June.
Clark has raised rates about 20 percent to pay for a loan it took out to pay for power purchased from Kaiser and other suppliers late last year and early this year, as well as to offset increases in the amount charged by Bonneville, Shutt said.
Enron Corp., Sempra Energy, El Paso Corp. and about 40 other power sellers have asked FERC Judge Carmen Cintron to throw out refund claims made by Clark and other power buyers. They argue they charged more for electricity because of a surge in natural gas prices and a drought that reduced production from the Northwest's hydroelectric plants.
Kaiser had planned to restart some production at its Washington plants in October. The company's executives announced last week they won't restart the Mead plant and another facility in Tacoma because of falling aluminum prices.