Thursday, February 01, 2001, 12:09 a.m. Pacific

BPA wants Kaiser to share millions

by Susan Kelleher Seattle Times staff reporter Barbara Minton / The Seattle Times This Spokane electric plant provides power to Kaiser Aluminum, which has made millions by reselling cheap energy from the Bonneville Power Administration. Kaiser Aluminum could lose the right to buy subsidized power from the Bonneville Power Administration unless it agrees to share millions of dollars from the resale of cheap BPA power with Northwest ratepayers, a BPA spokesman said yesterday. In hardball negotiations with the aluminum giant, the federal power-marketing agency said it has declared an impasse in its negotiations with Kaiser over the windfall and will begin subtracting the profits the company collects during the next eight months from the power reserved for the company in a new five-year contract.

Meanwhile, Kaiser's apparent refusal to share millions with the federal agency has put the BPA in the position of buying back power for up to 22 times more than it cost to produce it.

Kaiser pays the BPA $22.50 a megawatt-hour for electricity, a rate that was established for aluminum producers when five-year contracts were signed in 1995. A megawatt-hour now sells for between $200 and $500, an amount that could generate half a billion dollars in profits for the company without it having to produce a thing.

The irony of selling its own subsidized power at a windfall profit for someone else in order to buy power in a crazy market isn't lost on BPA spokesman Ed Mosey. "I think it's safe to say that the industry has never run this way before," he said.

The stalemate between Kaiser and the BPA underscores the high stakes in the volatile West Coast power market, where power suppliers spend millions of dollars a day buying scarce megawatts.

Late last year, three Northwest aluminum companies cut back or closed their energy-intensive smelters to sell the power they saved. The resale of electricity was allowed in the contracts they signed with the BPA.

The new contracts do not allow resale of power.

In cutting back operations, those companies, including Kaiser, agreed to share a portion of their electricity sales with the BPA, which was facing a 1,000-megawatt shortfall and the prospect of paying full price in the sky-high energy market.

Another company, Alcoa, agreed to sell some of its power back to the BPA at a reduced rate. But Kaiser recently told the BPA that it wouldn't agree to the 25 percent cut that Columbia Falls Aluminum and Golden Northwest Aluminum agreed to give the BPA until their new contracts start Oct. 1.

Kaiser spokeswoman Susan Ashe said that the company may still pay a share of the electricity windfall to the BPA but that it needs the money to continue to pay workers who were laid off when operations were shutdown or curtailed in Mead and Trentwood in Spokane County and in Tacoma.

"They've suggested a share of the proceeds, and we can't agree on the amount," she said of the BPA's offer. "We're going to use this opportunity to contribute to our near- and long-term viability. We're not operating, but we still have overhead and fixed costs, and huge personnel and medical liabilities."

Yesterday, Kaiser rejected union demands that laid-off workers continue to receive full wages while its Mead plant is shut down.

"There's no way they should be profiteering from reselling federal power and then ask us to draw unemployment," Steelworkers Local 329 steward Wayne Bentz said.

Information from The Associated Press and staff researcher Vince Kueter is included in this report.

http://seattletimes.nwsource.com/cgi-bin/WebObjects/SeattleTimes.woa/wa/gotoArticle?zsection_id=268466359&text_only=0&slug=kaiser01&document_id=134264241

-- Martin Thompson (mthom1927@aol.com), February 01, 2001

Answers

Kaiser is in business to make money and survive. It's only a windfall profit, to a buracrat or politition who has his head so far up his anal orfice the blood supply is cut off.

-- Lee Blocher (cblocher@northernway.net), February 01, 2001.