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Kaiser, BPA Can't Agree by John Stucke - Staff writer The Spokesman Review, February 1, 2001

Company won't commit to reopening Mead or investing in electricity projects

Spokane -- viability of our smelter assets at stake."

In Spokane, those stakes include 1,200 jobs and a $60 million payroll when Mead is running at full capacity.

On Wednesday, Kaiser laid off between 20 and 30 salaried staff, Mead plant manager Steve Anderson said. Overall, management jobs have been cut by 40 percent since the shutdown.

Mosey traveled to Spokane on Wednesday morning to underscore BPA's disappointment and relay the agency's demands: If Kaiser doesn't submit an acceptable plan that returns about 30 percent of the power profits to BPA, the federal agency may seek to recover the cash it wants by hiking Kaiser's electricity rates under a new contract next fall.

It's the best leverage BPA has, but one that could keep the smelter shut.

In its contract with BPA that expires Sept. 30, Kaiser has the right to resell its allotment of BPA power. The provision had never been used until late last year, when electricity prices soared.

Because Kaiser could make more money reselling federal electricity than making metal, it closed the smelter in December.

During December and January, Kaiser made about $88 million from selling its electricity back to BPA at about 10 times the price it originally paid the federal agency.

On Wednesday, the company announced it had sold its February and March power, and a portion of its April through September allotment. This time, BPA was a marketing agent instead of the buyer. The sales netted the company another $130 million, Forsyth said.

This windfall has earned Kaiser criticism from government officials and laid-off Steelworkers, who openly doubt the veracity of Kaiser's claim that the profits will be used to restart the Mead smelter.

Now, Mosey said, BPA wants Kaiser to share the wealth.

"It's a game of chicken because we're ready to go to market again for them," he said.

Without an agreement, Mosey said officials are left to wonder if Kaiser really intends to reopen the smelter.

Forsyth was ready with an answer.

"We would like to say `Here's a commitment, Spokane,"' Forsyth said.

However, no such assurance can be made, added company spokeswoman Susan Ashe.

Kaiser estimates that on average, it will pay an extra $70 million per year during the next five years for BPA electricity. That's a $350 million dollar hit that makes aluminum production unprofitable at Mead, she said.

Forsyth said the high prices are crippling the basic industries in the Northwest, perhaps by regional design.

Other business sectors such as the power-needy high-tech industry and growing urban centers, he said, want to unplug big users such as aluminum companies and grab the coveted BPA power.

"There are interests in the Northwest that would like to see the entire aluminum industry go away," Forsyth said. "Here the region is chasing us away and now they want money back as they chase us out the door."

He said giving money back to BPA does nothing for the Mead smelter.

For Kaiser to enter into a settlement, Forsyth said BPA must drop its one-size-fits-all approach to dealing with aluminum companies.

BPA wants a deal with Kaiser structured on earlier agreements struck with Golden Northwest Aluminum Co., which operates two smelters in Goldendale, Wash., and The Dalles, Ore., and the Columbia Falls (Mont.) Aluminum Co.

Those two companies are returning nearly a third of the profits from federal electricity sales to BPA. Furthermore, each company is paying full wages to workers laid off because of power sales and is investing money in new generation projects.

The two companies are working toward a goal of leaving the folds of BPA in five years.

Those scenarios are impossible for Kaiser, Forsyth said.

Saying that all aluminum companies have similar needs is a "gross oversimplification," Forsyth said.

A centerpiece of Kaiser's proposal includes BPA creating two blocks of power for customers to buy. The first would be a large block priced to reflect BPA's cost. The second, smaller block, would be priced at market levels.

The proposal, Forsyth said, provides true costs that are safe from price gouging and allows customers flexibility in how much they use.

While Kaiser deals with BPA, it also is trying to reach an accord with its laid-off work force, members of Steelworkers Local 329.

The labor contract requires that Kaiser pay Steelworkers left jobless because of power sales about 70 percent of their wages.

The remaining 30 percent is being negotiated, with Steelworkers wanting Kaiser to make up the difference by using its windfall, and the company wanting workers to tap unemployment insurance to supplement company dollars.