Business - Business News

POSTED: Wednesday, Jun. 24, 2009

BPA edges closer to deal that would keep Intalco smelter operating

The outlook for continued operation of the Alcoa Intalco Works aluminum smelter appeared a bit brighter Wednesday, June 24, after Bonneville Power Administration tentatively reaffirmed its willingness to provide enough low-priced power to maintain operations at the 500-employee facility.

That affirmation came in a complex 488-page draft document issued late Tuesday, June 23, in which the federal power marketing agency announced decisions on a number of legal and technical issues that affect the price it will charge all of its customers during the two-year period beginning Oct. 1, 2009. On issues of direct concern to Intalco, BPA overruled public utility districts and other power users, who had argued that BPA should not provide any power to Intalco if doing so would mean higher prices for other BPA power customers.

“We’re encouraged that BPA is defending the right to serve us,” said Mike Rousseau, manager of the smelter west of Ferndale.

But Rousseau also noted that three key issues remain to be resolved before BPA issues its final decision on the two-year rate period in late July 2009:

How much cheap BPA power will be available?

Rousseau said Intalco needs at least 320 megawatts, or enough to operate two of the plant's three potlines.

What price will BPA charge?

BPA now indicates it is willing to charge Intalco the same industrial power rate that other industries in the region pay to their BPA-served public utility districts-something that Alcoa officials have sought for years. But will that rate be low enough to keep the local smelter operating when a sputtering global economy has depressed aluminum prices? The power price won't be set until next month.

Can BPA and Alcoa agree on a longer-term power contract of seven years or more?

Rousseau said a longer-term deal is critical because Alcoa could lose money on Intalco's aluminum production for the next couple of years if economic problems are prolonged. The Pittsburgh-based parent corporation would only be willing to do that if it has some guarantee of a low-priced power supply in the more distant future, when demand and price would be expected to rise.

"We need to have power certainty locked up for two potlines for a minimum of the next seven years," Rousseau said. "If we're going to bleed as much as we're bleeding right now, we need to be able to see where the transfusion is."

Talks on a longer-term deal are ongoing, but time may be growing short.

"We're still right on the edge," Rousseau said. "We need to get through this very quickly."