the film forum library tutorial contact

Bill Opens New Front Between BPA, Plants by Tom Detzel, The Oregonian staff The Oregonian, May 4, 2001

Critics say aluminum companies would earn billions by reselling subsidized power

WASHINGTON -- Northwest aluminum companies could continue making money by reselling low-cost electricity from the Bonneville Power Administration under a Republican bill to ease the West's electricity crisis.

Critics said the bill would allow the companies to continue earning billions of dollars from federally subsidized power, but an industry lobbyist said Thursday the beleaguered companies are just looking for a way to survive.

The legislation opens a new front in the dispute between the BPA and the region's energy-intensive aluminum plants, most of which are shut down because wholesale electricity markets are too high to operate at a profit.

Other Northwest ratepayers also have a stake in the fight, because Bonneville's contractual obligation to serve the companies could force the agency to more than double a proposed increase in wholesale power rates this fall.

The language protecting the companies' rights to resell BPA power was in a bill introduced this week by Rep. Joe Barton, R-Texas, called the "Electricity Emergency Relief Act," but its impact wasn't clear until Thursday.

Overall, the bill aims to cut the odds of summer blackouts in California and elsewhere by boosting electricity supplies and cutting demand.

But at a hearing on the measure, BPA lobbyist Jeff Stier said a section of the bill meant to reduce demand by allowing consumers to resell their unused electricity also would apply to the aluminum companies.

The effect, he said, would be to undermine BPA's chief strategy for holding the agency's rate increase to less than 100 percent: avoiding the need to buy electricity at record prices on the wholesale market to serve the companies.

The agency is stuck in that predicament because it has contracts for 11,000 megawatts of power, yet can only generate about 8,000 megawatts from the 29 Columbia River system dams and one nuclear plant. About 1,500 megawatts

are under contract with six aluminum companies and three big industrial users. Under the Barton bill, Stier said BPA could end up being forced to sell the companies power for $50 or $60 per megawatt hour, which the companies could then resell for hundreds of dollars per megawatt hour on the open market.

Meanwhile, other BPA customers public utilities and the residential ratepayers -- would end up with a rate increase of 200 percent to 300 percent, he said.

Stier appeared Thursday before Barton's House subcommittee on energy and air quality. Three California officials also testified that the bill failed to address the main problem in the energy crisis: out-of-control prices.

Among them was Gov. Gray Davis' senior energy adviser, Richard Sklar, who said some form of effective price caps are needed for the next two years.

Barton's bill is scheduled for amendments and a vote late next week, and committee Democrats are expected to propose a price cap of some kind. What will happen with the aluminum companies is unclear.

An aide to Barton said her boss supported remarketing rights for the companies, but Rep. Greg Walden, R-Ore., who sits on the panel, said he's not convinced the provision belongs in a bill that addresses emergencies.

"There's a lot at stake here -- trying to figure out how to de-industrialize the Northwest and be fair to other consumers of power," said Walden, who has an aluminum plant in his district at The Dalles.

Four of BPA's aluminum and industrial customers have rights to remarket unused electricity under their existing contracts.

Through October, when the new contracts without the remarketing rights take effect, they are expected to earn $1.4 billion from reselling BPA power.

Some of the money is being used to pay laid-off workers, and three companies have agreed to share part of the proceeds with BPA.

Rep. Peter DeFazio, D-Ore., a harsh critic of the arrangement, released a study last month accusing the companies of making "obscene" profits.

He said the Barton bill "would perpetuate what everybody thought is an outrageous deal -- that the companies get to buy low, sell high and not produce anything."

Aluminum officials on Thursday defended the bill, saying their industry should be treated the same as any other residential or business consumer that is given rights to sell unused electricity at market rates.

The companies are running a public relations campaign in the Northwest that accuses Bonneville of trying to shut the industry down at a cost of more than 10,000 jobs.

As part of its plan to hold down rates, BPA has asked the companies to accept modest payments and curtail operations for the next two years so the agency can minimize its purchases in the wholesale market.