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Energy Chief Slams Resales by Bert Caldwell The Spokesman Review - December 13, 2000

BPA asks Kaiser to explain what it will do with power profits

U.S. Energy Secretary Bill Richardson has asked Bonneville Power Administration officials to block aluminum company electricity sales.

And Bonneville wants Kaiser Aluminum Corp. to explain its plans for the millions in profits earned on sales made since June, said agency spokesman Ed Mosey.

Kaiser announced the latest sale Sunday. The company will net $52 million by selling 191 megawatts to Bonneville through the end of December.

But the move completely shut down Kaiser's Mead smelter for the first time since 1946. Some 400 workers lost their jobs.

Kaiser officials said they plan to reopen the smelter Oct. 1, 2001. Until then the company will continue to pay full benefits and, for most workers, 70 percent of wages.

Richardson, the nation's top energy official, Monday strongly criticized Kaiser's actions.

"While Kaiser will make millions from the use of a federal resource, I am concerned that this is coming at the expense of employees that will be out of work and that may not be fully compensated," he said.

Richardson added: "I have instructed Bonneville to explore all necessary actions to prevent Kaiser from remarketing this power."

Rep. George Nethercutt, R-Wash., Tuesday faulted Richardson's decision to step into the controversy that has arisen around the Kaiser sales.

"He shouldn't be injecting himself into this contractual relationship," Nethercutt said, adding that the outgoing Clinton administration has been rushing to take actions a new president cannot reverse.

He said he has drafted a letter to Richardson objecting to the department's position on Kaiser.

Kaiser and the other Northwest smelters buy all or part of their electricity from BPA. The current price is about $22.50 per megawatt.

In the deal announced Sunday, Bonneville repurchased that power from Kaiser for $500 per megawatt.

The agency and regional utilities have paid unprecedented prices for electricity because cold weather has stretched supplies along the West Coast to the limit, although authorities Tuesday lifted a warning of possible shortages.

Despite the price, Mosey acknowledged that the purchase from Kaiser was good for Bonneville, which might have paid more elsewhere.

"We're actually getting a better deal buying our power back from Kaiser," he said. `'How bizarre is that?"

But unlike Kaiser sales in June and November that also cost jobs, Mead's closure ignited a firestorm.

"We're hearing a lot of folks who feel that the company should not receive windfall profits from what is, after all, a public asset," Mosey said.

Bonneville supplies 40 percent of the power used in the Northwest. Most comes from federal dams on the Columbia and Snake rivers.

Mosey said the widespread criticism, plus Richardson's interest, has agency lawyers looking for ways to stop further power sales by Kaiser, as well as Columbia Falls Aluminum in Montana and Golden Northwest Aluminum, which operates smelters at Goldendale, Wash., and The Dalles, Ore.

He compared Kaiser's assurances that the company is pursuing ways to assure the future of its Mead and Tacoma smelters with the activities of Golden Northwest Chief Executive Officer Brett Wilcox, who has worked with Bonneville for months on a plan to construct a natural gas-fired turbine that would feed electricity to his plants.

"That's what we're looking for from Kaiser," Mosey said.

He added that Bonneville wants a specific plan by the end of the week.

Kaiser Vice President Pete Forsyth, who spoke to Bonneville officials Monday, said he had not heard of any such requirement.

And Kaiser is not prepared to deliver a plan anytime soon, he said.

"An answer doesn't come from out of the blue, overnight," he said.

Forsyth said Kaiser has ongoing meetings with potential electricity suppliers. New generating plants are not the only option, he said.

He said the fluidity of the North-west's energy supply picture -- natural gas as well as electricity -- has complicated efforts to nail down costs.

Even the price of power Bonneville will deliver under a contract that starts next Oct. 1 is unknown, he said.

Forsyth also defended Kaiser's contractual right to continue selling power. Sunday's 191-megawatt deal expires Jan. 1, and the company will be free to resell that power until next Oct. 1.

When Kaiser signed its power supply agreement with Bonneville in 1996, he said, the agency's price was above the market price, then about $18 per megawatt.

That was a risk, he said, as was the decision to take the right to resell the power, possibly for less than it cost the company to buy.

Columbia Falls and Golden West took the same chance, Forsyth said. "People have failed to look at this issue through time."

He said Kaiser will continue to work with Bonneville on steps that will enable the company to sustain smelter operations into the future.

Spokeswoman Susan Ashe added that Bonneville must be more specific about what it wants from Kaiser if the company is to respond in kind.

"I think it's in their court in terms of principles and guidelines," Ashe said. "In our view, it's going to take a number of things for us to be viable in the future.

"I don't think there's any silver bullet out there."