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Intalco Works says it Could Shut Without BPA Break by Associated Press Seattle Post-Intelligencer, April 10, 2009

FERNDALE, Wash. -- Alcoa's Intalco Works aluminum smelter could shut down within weeks unless the Bonneville Power Administration offers it a break on electricity, a consultant for the aluminum company says.

Jack Speer, a former Alcoa vice president who is now working as a consultant for the company, told a public meeting at BPA's Portland, Ore., headquarters on Thursday that the smelter west of Ferndale in northwestern Washington is losing money because power costs too much and the price of aluminum is too low.

Without the promise of a price break under a new BPA rate that takes effect Oct. 1, Speer said the plant, which has about 500 employees, has little chance to survive, the Bellingham Herald reported.

"We're better off shutting the plant down right now," Speer said. "It is a good plant. It has an excellent work force and a supportive community. ... It should operate for years. Yet here we are in this situation we have to deal with."

Alcoa wants BPA to link its electric bill to the world price of aluminum, with the new rate in place by Oct. 1 at the latest. The company also hopes the variable rate can be a part of a longer-term power contract to take effect in 2011.

But both BPA staffers and representatives of other power users argued that the issue is too complex to be worked out before April 17, when BPA is supposed to file its formal response to Alcoa's proposal for power rates taking effect Oct. 1. BPA staffers favored starting up a new process to resolve financial and legal implications of such a deal, giving rival other power users a chance to study it and offer rebuttal.

That could take months, and Bill Oplinger, an Alcoa vice president.

"Every day we delay this decision is a day we lose more money," he said. "We have weeks, not months."

"I think the smelter will be closed by that time," Speer said. "The question is, would it reopen?"

Oplinger said Alcoa has already cut production at its U.S. plants by about 30 percent in recent months. Without a better price for electricity, Intalco would be "very much at the top of the list for the next level of production cutbacks," he said.

Alcoa currently pays about $60 per megawatt for power it contracted to buy from other sources between now and 2011, Speer and Oplinger said.

Intalco has been getting a $15-per-megawatt cash subsidy from BPA, but the legality of that arrangement has been questioned, and the plant is still losing money even with the subsidy, they said.

"The shutdown-now option is a terrible option," Oplinger said. "We think that's a loser for everybody. ... We don't want to shut down the plant, but we can't continue to have the losses that we have currently."

Representatives of the Northwest's public utilities object to price breaks for Alcoa, saying it would come at the expense of their own industrial customers, who also are struggling with high power costs and lower prices for their products.

Mike Rousseau, Intalco plant manager, countered that electricity accounts for about one-third of the operating costs of an aluminum smelter.

"A little increase impacts us significantly more than the other power users," he said. "We're in a loss situation. We're bleeding badly. The only alternative to reduce our losses is to go after the power."

In addition to Intalco, Alcoa operates an aluminum smelter near Wenatchee. That smelter has a power contract with the Chelan Public Utility District running through 2028.