Already operating at about two-thirds of capacity,energy-intensive aluminum smelting plants in the Pacific Northwestare facing further cutbacks and plant closings because of highpower prices that have some of the operators looking at developingtheir own natural gas-fired generators. At risk are five companiesand ten smelting plants.

“The ones that have not locked up firm supplies of low-cost energyare the ones that are closing,” said a spokesperson for Portland,OR-based Bonneville Power Administration (BPA), thefederally-controlled marketer/transporter of mainly hydro-electricpower that announced last week it was raising its prices by 15%starting next fall (see Daily GPI, Nov. 10). The announcement was yet another blow to themulti-billion-dollar aluminum industry that represents 3,000 MW ofelectricity load when it is operating at full capacity, but has beenusing around 2,000 MW this year.

“Potentially, Kaiser Aluminum and some of the others will beable to keep some pot lines up and operate at a reduced capacity,”the BPA spokesperson said. “Virtually all of the plants havepartial service from us right now.”

The spokesperson confirmed that BPA is talking to several of thealuminum plants about plans they have to construct their own powerplants, with which they would like BPA’s help. The powermarketer/transporter wants to help, but is concerned about pushingsome of its costs over to other, smaller customers as a result.

“They are all looking at whatever they can do to remain inoperation, so they are looking at natural gas-fired generation,”said the spokesperson, noting that there is little chance thatwholesale electricity prices will drop enough to avoid implementingthe rate increase next October. “We’re in the market so heavilyourselves to purchase power, so unless there was a dramatic change,we don’t see the prices coming down. But this is a volatile marketand anything can happen, although it is unlikely.”

BPA’s average cost is in the $22/MWh range, so just about anysupplies it buys on the market will be higher than its ownfederally produced supplies. Generally, the cause for the priceincreases and the plant closings or cutbacks are a direct result ofthe spreading generation capacity shortage throughout the westernstates, the BPA official said.

“By the time it is delivered, you are looking at $29.50/MWh forthese (direct access industrial) customers with a delivery charge.And we’re looking at about 1,500 MW, or half the industry’s totalsmelter capacity in the Northwest,” the spokesperson said. “Theones closing down don’t have service from us and are in the halfthat doesn’t receive power from us. The ones closing have thesmallest allocations from us.

“It is a complicated, diced up situation. Kaiser has probably a500 MW load, and it is probably only getting 300 MW from us rightnow. With this rate increase, it pushes our relatively low-costpower to a point where it is too high for plants to operate unlessthe price of metal is a lot higher.”

The growth in higher priority residential loads has siphoned offalmost half of the 3,000 MW that went to the direct serviceindustrial (DSI) customers, said the BPA spokesperson, as a resultof the region’s growing shortage of power. Environmental and publicpower groups object to even this level of service to the largeindustrial plants.

©Copyright 2000 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.