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NW Aluminum Plant Shut-Downs Looming
Already operating at about two-thirds of capacity, energy-intensive aluminum smelting plants in the Pacific Northwest are facing further cutbacks and plant closings because of high power prices that have some of the operators looking at developing their own natural gas-fired generators. At risk are five companies and ten smelting plants.
"The ones that have not locked up firm supplies of low-cost energy are the ones that are closing," said a spokesperson for Portland, OR-based Bonneville Power Administration (BPA), the federally-controlled marketer/transporter of mainly hydro-electric power that announced last week it was raising its prices by 15% starting next fall (see NGI, Nov. 13). The announcement was yet another blow to the multi-billion-dollar aluminum industry that represents 3,000 MW of electricity load when it is operating at full capacity, but has been using around 2,000 MW this year.
"Potentially, Kaiser Aluminum and some of the others will be able to keep some pot lines up and operate at a reduced capacity," the BPA spokesperson said. "Virtually all of the plants have partial service from us right now."
The spokesperson confirmed that BPA is talking to several of the aluminum plants about plans they have to construct their own power plants, with which they would like BPA's help. The power marketer/transporter wants to help, but is concerned about pushing some of its costs over to other, smaller customers as a result.
"They are all looking at whatever they can do to remain in operation, so they are looking at natural gas-fired generation," said the spokesperson, noting that there is little chance that wholesale electricity prices will drop enough to avoid implementing the rate increase next October. "We're in the market so heavily ourselves to purchase power, so unless there was a dramatic change, we don't see the prices coming down. But this is a volatile market and anything can happen, although it is unlikely."
BPA's average cost is in the $22/MWh range, so just about any supplies it buys on the market will be higher than its own federally produced supplies. Generally, the cause for the price increases and the plant closings or cutbacks are a direct result of the spreading generation capacity shortage throughout the western states, the BPA official said.
"By the time it is delivered, you are looking at $29.50/MWh for these (direct access industrial) customers with a delivery charge. And we're looking at about 1,500 MW, or half the industry's total smelter capacity in the Northwest," the spokesperson said. "The ones closing down don't have service from us and are in the half that doesn't receive power from us. The ones closing have the smallest allocations from us.
"It is a complicated, diced up situation. Kaiser has probably a 500 MW load, and it is probably only getting 300 MW from us right now. With this rate increase, it pushes our relatively low-cost power to a point where it is too high for plants to operate unless the price of metal is a lot higher."
The growth in higher priority residential loads has siphoned off almost half of the 3,000 MW that went to the direct service industrial (DSI) customers, said the BPA spokesperson, as a result of the region's growing shortage of power. Environmental and public power groups object to even this level of service to the large industrial plants.
Richard Nemec, Los Angeles
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