BPA and Alcoa will have more time to work out the details of a possible long-term power sales agreement thanks to a 35-day contract extension signed May 23. Alcoa's existing contract would have expired May 26 but will now run through June 30, 2012.

The two parties have been working on an agreement that would provide Alcoa's Intalco Plant in Ferndale, Wash., with 300 average megawatts for up to 10 years. If a new agreement can be reached, it will provide long-term certainty to Alcoa and its 500 employees while allowing BPA to serve energy needs that yield operational and financial benefits for the region. Alcoa's current contract provides 320 average megawatts.

The length of any new contract must be supported by an Equivalent Benefits Test. The benefits test is the result of a decision handed down by the U.S. Court of Appeals for the Ninth Circuit. The court ruled that nonobligatory contracts with direct-service industries, such as Alcoa, must be consistent with sound business principles. BPA has interpreted this to mean the benefits to BPA of serving the direct-service industry must equal or exceed BPA's cost of serving the load during the period of service.

Any new contract proposal that might be arrived at during the current contract extension period also would be subject to public review. If no agreement can be reached during the extension and both parties want to continue moving forward, there is the possibility of another short-term extension.

Under the Northwest Power Act of 1980, certain electricity intensive industries were allowed to buy wholesale power directly from BPA. These were primarily aluminum smelters. Today, Intalco is the only smelter directly served by the agency. As recently as the mid-1980s, about one-third of BPA's revenues came from 12 smelters consuming approximately 3,000 average megawatts.