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Intalco says Plant Could Close Without Power Deal by John Stark The Bellingham Herald, March 21, 2009

The 500 jobs at the Alcoa Intalco Works aluminum smelter are at "extreme risk" unless the Bonneville Power Administration approves a company proposal for an electric power supply contract, plant manager Mike Rousseau said Friday, March 20.

Rousseau said Pittsburgh, Pa.-based Alcoa Inc. filed a supply contract proposal earlier in the day in which BPA would charge the smelter a power rate pegged to the world price for aluminum. That price has plunged in recent months as a global economic slump has reduced demand for the metal.

In a written statement, Rousseau said Alcoa wants to keep making aluminum and providing jobs at the smelter west of Ferndale.

"Our proposal, which involves paying more for power in good times and a reduced rate in tough times, would enable us to do just this," Rousseau said. "We are fighting for survival and believe BPA should do everything within its power to be part of the government's solution to addressing the growing unemployment rate. Without a competitive power contract, the entire facility and its 500 jobs are at extreme risk."

Katie Pruder, a BPA spokeswoman, said the federal power agency had no immediate response to Alcoa's proposal. In the weeks ahead, BPA will file a formal response as part of the rate-setting procedure that is now under way.

"We do value our relationship with Intalco and we really do understand the significance of those jobs in the Northwest," Pruder said. "We're working with the region to balance those needs."

As recently as October, 2008, Alcoa and BPA appeared to be headed to an agreement on a new long-term contract that would have given Intalco enough low-cost hydroelectric power to have a chance at being competitive. That deal would have supplied the company with power to operate the plant at half-capacity for 10 years beginning Oct. 1, 2011, plus a somewhat smaller amount of power for the seven years after that.

In exchange for BPA's power supply commitment, Alcoa had tentatively agreed to invest $125 million or more in modernizing the smelter, while maintaining a minimum $48 million payroll - enough for about 480 jobs.

But talks aimed at firming up that deal collapsed in January as the falling price of aluminum undermined the attractiveness of the terms for the company.

On Friday, March 20, Rousseau said Intalco needs a break on its power costs before 2011. He said the company's current short-term power contract runs out Sept. 30, 2009, and he wants to see a much lower power rate in effect after that. That rate could then form the basis for a longer-term contract that would kick in starting Oct. 1, 2011.

Rousseau noted that Intalco already has cut more than 100 jobs, including both those directly employed by Alcoa and others who worked for contracting firms.

"We have pulled every lever we can, in cost-cutting mode, to survive," Rousseau said.

Rousseau and representatives of the International Association of Machinists and Aerospace Workers Union contended that Intalco is now paying a power price that is far above that charged to BPA's customers, which include public utility districts and municipal power systems.

"The only thing we want is a fair deal and equal treatment," said Glenn Farmer, chief shop steward for the union.

As recently as the mid-1990s, BPA was supplying more than 3,000 megawatts to 10 smelters in the Pacific Northwest - an amount of power that is more than double the total power demand for the city of Seattle today. But when the price of power from non-BPA sources soared in 2000 and 2001, the federal power agency no longer had enough cheap power to meet demand, and most of the smelters had to shut down.

Pat Flaherty, another union representative, said the years of uncertainty have been tough on Intalco's workers.

"They're nervous," Flaherty said. "Everybody's nervous."