Power prices may put Intalco workers on the street

Published on Thu, Apr 12, 2001 by Brendan Shriane

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Power prices may put Intalco workers on the street

By Brendan Shriane

The nation’s power crunch may be hitting more than 900 local aluminum workers very hard.

Lloyd Jones, president of Intalco’s owner and operator, Alcoa’s U.S aluminum smelting division, said the company will be forced to close its Intalco aluminum plant in October unless the company can get much cheaper electricity rates than the ones being considered by the Bonneville Power Administration (BPA), its power supplier.

“The work force is scared. It’s right to be scared,” Intalco plant manager Jim Frederick said.

Intalco, with an annual payroll of $60-70 million by company estimates, is the county’s third largest employer, representing about 5 percent of Whatcom County’s economy.

The BPA is probably not going to offer more affordable power for aluminum makers any time soon. On Monday, acting administrator Steven Wright called for all 10 aluminum smelters in the Northwest to shut down for two years as part of a plan to keep electricity rate hikes to a minimum. The BPA said it will offer some sort of compensation to the workers.

Alcoa cannot wait for that tomorrow. Jones doesn’t see an economic situation in two years that will allow the smelter to run profitably at current rates.

Jones said it takes $30,000 to restart each of the factory’s 720 pots, making starting up exceedingly expensive. Frederick compared the complications of restarting a plant after two years to leaving a car sitting for a comparable time. The Intalco smelter is

currently only using about 300 of its 720 aluminum melting pots but has not been forced to lay off any employees yet. At full capacity, the Intalco plant produces nearly 300,000 metric tons of aluminum per year usually in the form of T-shaped ingots or logs.

The BPA is asking local utilities to reduce their power needs by 5 to 10 percent and issuing a direct call for citizens to reduce power usage by 10 percent. Even so, without drastic action such as the suggested shutdown, power prices for many in the region could rise 250 to 400 percent, Wright said. Even with such measures power rates will likely double.

Intalco’s current agreement with the BPA expires on Oct. 1. At a news conference Tuesday, representatives of Alcoa said the company has been negotiating with BPA for a year. It is looking for a five-year agreement to provide power for the aluminum manufacturer. Alcoa officials say they’ve been told BPA needs more time if it is going to change its whole power rate structure.

Wright said the agency will have to raise rates in response to a combination of increasing power demand and the second-worst drought conditions in the area in the past 72 years, but Alcoa is skeptical. “We think the BPA is cynically over-inflating the price (of electricity)” Jones said.

The federal power agency’s dams on the Columbia and Snake rivers will fall short of meeting production levels, forcing BPA to buy power on the increasingly expensive wholesale power market.

Intalco would eventually like to generate its own power. Jones said given time, the smelter could be completely energy-independent. Intalco is looking at options such as a coal-burning plant. “We could be off the grid at the end of the five-year contract,” Jones said. That would suit BPA, which has called for all aluminum smelters to be self-sufficient by 2006.

New coal plants can burn cleanly, Jones said. Gas-fired plants, like the SE 2 plant proposed at Sumas, are not an option because of high prices.

To remain profitable in the immediate future, Alcoa would like a two-tiered power charge plan. The company would pay the same cost Bonneville pays to produce the power for 75 percent of its electricity and the buy its remaining power at the higher wholesale rate.

Intalco management is hoping employees and the general public can apply some pressure on BPA to drop the demand for smelters to close and to accept the Intalco power deal.

“Bonneville is a political animal. It responds to political pressure’” Frederick said. “We need to find a compromise — it’s not all or nothing. We have reduced our power intake 25 percent.”

“We can be part of the solution here,” Jones said.

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