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Intalco Secures 5-year Power Supply by John Stark Bellingham Herald, August 1, 2006

Bonneville Power to pay portion of provider's bill

The 450 jobs at Alcoa Intalco Works are safe for now, thanks to a new power supply contract that is expected to keep the aluminum smelter west of Ferndale operating at its current reduced capacity for the next five years.

"That's more stability than we've had at this operation for a long time," Alcoa spokeswoman Judy Chestnutt said.

As recently as 2001, the Intalco smelter, owned by Pittsburgh-based aluminum giant Alcoa, provided about 900 family-wage jobs. But the West Coast energy crisis of that year cut off the smelter's lifeblood: the low-cost hydroelectric power that had been provided for decades by the federal Bonneville Power Administration. The smelter shut down for a year, then resumed production in 2002 at reduced output and payroll, as company executives and BPA officials tried to find some way of keeping the power-intensive industry in business without forcing other BPA customers to pay too much more.

Mike Rousseau, the smelter's general manager, said the power supply contract announced Monday will enable Alcoa to take advantage of cash payments available from BPA under terms of a different five-year deal announced June 1. BPA agreed to make the payments instead of continuing to supply Alcoa with low-cost hydroelectric power, as the company would have preferred.

The BPA payment will be $12 per megawatt and will cover no more than 320 megawatts of Alcoa's power purchases. But to get the money, Alcoa had to find its own five-year electricity supply in the power marketplace at a price low enough to justify keeping the smelter operating. Rousseau declined to say who will provide the new power.

With that task now accomplished, Intalco can continue to operate one of its three available aluminum potlines, as it has been doing since 2003 when the company dropped from operation of two potlines down to one and discharged about 200 workers.

Asked if Alcoa might find additional power sources over the next five years that could boost production and payroll, Rousseau didn't dismiss the possibility out of hand.

"We're always looking for opportunities for our business, " Rousseau said. "There's always hope. We're going to continue to look."

Alcoa officials are still clinging to the hope that after their latest five-year deal with BPA expires in 2011, the company can get back on the federal system and get a share of the low-cost Columbia River hydroelectric power that once fueled a flourishing Northwest aluminum industry. Aluminum plants elsewhere in the region shut down one by one as population growth turned the region's power surplus into scarcity.

BPA has already embarked on a public process to chart power supply distribution for the 20-year period beginning in 2012. BPA spokesman Scott Simms said a renewed supply of cheap hydroelectric power for Alcoa is not out of the question after the current five-year deal expires. BPA will give that option serious study during the planning process now under way, Simms said.

Some public utility systems that get power from BPA would prefer that BPA stop providing any power or cash benefits to aluminum companies, since those deals tend to raise the price of power for those utility systems and their millions of customers in the region. But Rousseau said Alcoa will attempt to convince BPA's power planners that aluminum production is a good deal for the region, with an economic payback that justifies the cost.

"We think we are a valuable asset to the community in which we operate," Rousseau said. "We've got a viable facility here."