PR 61 05
BONNEVILLE POWER ADMINISTRATION
FOR IMMEDIATE RELEASE:
THURSDAY, June 30, 2005
BPA releases new policy for sales to aluminum companies
PORTLAND, Ore. -
The Bonneville Power Administration announced today that it would offer power benefits to three Northwest aluminum companies and one paper mill for five additional years. Beginning in the fall of 2006, BPA will provide the equivalent of up to 577 average megawatts to the industries that it has traditionally served directly.
"This was a very difficult decision," said Steve Wright, BPA administrator. "There is not enough low-cost federal system power to satisfy all interests, and we have worked hard to appropriately balance regional interests.
"On the one hand, low-cost federal power keeps important jobs in the region and helps support the economy of many Northwest communities. On the other hand, we have a responsibility to the rest of the region's ratepayers not to inappropriately shift costs to them," added Wright
BPA reached its decision only after extensive public discussions with regional interests.
Earlier this year, BPA announced it would provide some level of service benefits to the three aluminum companies and one paper plant, also known as direct service industries (DSIs). Today's announcement clarifies the level of benefits being provided and how they will be delivered. Under today's decision, BPA will provide 577 megawatts of benefits but at a cost capped at $59 million a year.
One of the challenges BPA faced, according to Wright, is that the companies have no statutory right to power going forward. But, they also have contributed to the regional economy and have been long-standing BPA customers.
This decision continues a trend of BPA ramping down service to DSIs. Service to DSIs has been declining since the pre-1995 period when contracts totaled over 3,000 average megawatts. In 1995, contracts were reduced to 2,000 average megawatts, and in 2002 contracts were reduced to 1,500 average megawatts.
In the decision, BPA made three stipulations.
First, BPA commits to provide up to $59 million annually for the five years to bring aluminum company rates down to be more in line with the rates BPA's public agency customers pay. Due to the uncertainty of world aluminum markets and electric power market prices, this full $59 million a year value may not be completely utilized, and therefore could have less impact on BPA rates.
Second, under no conditions will the aluminum companies pay less than BPA's preference rate, which is the rate paid by public utilities and cooperatives.
Third, credit provisions will be placed in the new DSI contracts to protect BPA and Northwest ratepayers from the risk that the DSIs will not be able to pay money owed to the agency.
If the companies take their full allocation of 577 average megawatts of benefits, BPA's public utility customers will see about a $1 per megawatt-hour increase over what their costs would have been absent the benefit. The current BPA wholesale rate for utilities is approximately $30 per megawatt-hour. If the companies use less, BPA's rate exposure will be less.
"We believe the agency is striking a balance between the need to keep our costs as low as possible and the chance to support jobs through limited benefits to the DSIs that may make it possible for them to continue to operate," said Wright. "This is not a guarantee that they will be able to operate, but it is an opportunity."
The decision calls for Alcoa Inc. to receive the value of up to 320 average megawatts; Columbia Falls Aluminum Company to receive up to 140 average megawatts; and Golden Northwest Aluminum Company up to 100 average megawatts. Port Townsend Paper Company will receive the remaining 17 average megawatts.
In the next steps, BPA will negotiate contractual agreements to implement this proposal by this fall and submit those proposed contracts for regional review and comment. BPA would then incorporate comments and proceed to offer contracts in early 2006.
Submitted for distribution on 06-30-2005 at 2:03 PM
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