The Bonneville Power Administration is a federal agency of
real consequence. The marketer of Columbia River hydropower
has a $2.3 billion budget, 2,700 employees, an impressive-looking
headquarters that sits just north of I-84 and a number of
friends in Congress.
All that doesn't matter. Last week--pressured by
the administration of Bill Clinton--its knees buckled before
the aluminum industry. And ratepayers in the Northwest will
pay for this capitulation.
The deal that BPA was forced to accept calls for the agency
to sell the aluminum industry at least 1,000 megawatts of
electricity each year. BPA, in turn, will have to buy the
electricity on the open market--most likely at a higher
rate than it will charge the aluminum smelters. This means
BPA could lose as much as $55 million annually.
To an outsider, it is remarkable that the 11 aluminum smelters
operating in the Northwest can have their way with Bonneville
so easily. They would hardly make anyone's top 10 list of
the most powerful special interests in the Northwest. The
smelters employ only 8,000 people and maintain low profiles
in state capitals.
Yet the subsidy they were granted last week is the sort
of corporate welfare many companies would envy.
Initially, BPA held firm against big aluminum. Last fall,
newly appointed BPA administrator Judi Johansen said that
in issuing new contracts for Bonneville's limited supply
of hydroelectricity, her priorities would be to meet the
demands of public utility districts, municipalities and
residential customers of investor-owned utilities (like
PGE and Pacificorp). Last on the list, she said, was
the aluminum industry--which BPA has absolutely no statutory
obligation to serve.
In fact, just four years ago, aluminum companies asked
to get out of contracts to purchase electricity from
Bonneville. At the time, the cost of Bonneville hydropower
was higher than the cost of electricity on the open market.
So big aluminum lobbied hard and, with the help of then-Senator
Mark Hatfield, was released from its obligations, while
retaining access to BPA's transmission lines.
Last year, not long after Johansen announced that BPA felt
no urgent need to serve the aluminum industry, officials
from the International Brotherhood of Steelworkers paid
a visit to the offices of Vice President (and presidential
candidate) Al Gore and Secretary of Energy Bill Richardson.
According to both Congressional sources and other sources
within BPA, the labor leaders emphasized how important it
was to aluminum workers for the industry to get its
hands on cheap BPA electricity. Richardson later visited
with his employee Johansen and told her, according to a
BPA staffer, "See what you can do."
As a consequence, "she had to backpedal--substantially,"
says Jeff Stier, an aide to U.S. Rep. Peter DeFazio. So,
instead of selling aluminum companies no BPA electricity,
she proposed to sell them more than 1,000 megawatts of power
annually at $23.50 per megawatt-hour. And since BPA now
has commitments to sell more power than it generates, the
federal agency will need to purchase electricity on the
open market to support big aluminum. Earlier this year,
open-market costs for electricity were $30 per megawatt-hour,
which would mean a $55 million annual gift to Big Aluminum.
Just who will underwrite this subsidy?
If you have to ask, you haven't been paying attention.
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Willamette Week | originally
published July 7, 1999 |
