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Power Agency Cuts Energy Deal for Aluminum Firms by Associated Press Billings Gazette, July 3, 2005

The Bonneville Power Administration has agreed to provide 577 megawatts of electric power at a discounted rate to three Northwest aluminum companies and a paper mill from 2006 to 2011, including 140 megawatts to the Columbia Falls Aluminum Co. in Montana.

Thirty-one federal dams and a nuclear power plant supply Bonneville with about 73 percent of the electricity the agency is obligated to provide to electrical cooperatives, municipalities, manufacturers and others.

The agency buys the remainder of the power it needs on wholesale electricity markets.

"This was a very difficult decision," said Steve Wright, BPA administrator in Portland, Ore. "There is not enough low-cost federal system power to satisfy all interests, and we have worked hard to appropriately balance regional interests.

"On the one hand, low-cost federal power keeps important jobs in the region and helps support the economy of many Northwest communities. On the other hand, we have a responsibility to the rest of the region's ratepayers not to inappropriately shift costs to them," Wright said.

Providing low-cost power to manufacturers translates into higher costs for other users of BPA electricity. Under the decision, BPA will provide 577 annual megawatts of benefits to the four companies, but at a cost capped at $59 million a year.

Despite the offer of 140 megawatts of federal power, Columbia Falls Aluminum Co. officials say it's too early to tell when or if the plant will increase production.

The company hasn't operated at full capacity since September 2000, largely because of high power prices.

At the time, the company employed about 540 people, with a $30 million annual payroll.

In January 2001, the plant shut down completely for the first time since coming online in 1955. Partial production resumed in March of 2002.

CFAC has been operating at 20 percent of capacity since March 2003. It employs about 150 people.

At full capacity, the plant uses 345 megawatts of electricity. Consequently, a $1 increase in power prices costs the company about $3 million per year.

The decision calls for Alcoa Inc. to receive the value of up to 320 average megawatts; Columbia Falls Aluminum to receive up to 140 average megawatts; and Golden Northwest Aluminum Co. up to 100 average megawatts. Port Townsend Paper Co. will receive the remaining 17 average megawatts.

If the four companies use their full allocation of 577 average megawatts of benefits, BPA's public utility customers will see about a $1 per megawatt-hour increase over what their costs would have been absent the benefit. The current BPA wholesale rate for utilities is approximately $30 per megawatt-hour.