BPA extends service to Alcoa

The Bellingham Business Journal

The Bonneville Power Administration (BPA) has agreed to continue providing wholesale power to the Alcoa Intalco aluminum plant in Ferndale for another 12 months under an existing contract that otherwise could have ended May 2011; service will now continue through May 2012.

Under the contract, BPA is providing 320 average megawatts of firm power to the plant at the agency’s Industrial Firm Power rate, which currently is $34.60 per megawatt-hour. In September, Alcoa asked BPA to extend that service, saying the power sale would allow the company a chance to continue operating and save about 500 jobs.

“We considered the request very carefully to make sure that, in addition to helping the plant continue operations, the power sale made good business sense for our other ratepayers,” BPA Administrator Steve Wright said in a press release. “It was important to assure that the net benefits from serving Alcoa exceeded the cost of service.”

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, often referred to as direct-service industries. At one time, there were as many as 10 smelters directly served by the agency. Today, Alcoa is the only one.

BPA signed the current contract with Alcoa in December 2009, and the company began receiving power from BPA last May. The service period was limited by a decision handed down by the U.S. Court of Appeals for the Ninth Circuit. The Court ruled that the benefits to BPA for serving the direct-service industry must equal or exceed BPA’s cost of serving the load during the period of service.

Following that ruling, BPA did an analysis that showed net benefits but, given the volatility of the economy, could only guarantee them through the coming May.

Following Alcoa’s request for extending service, BPA conducted another test. Not only had the current service period produced positive net economic benefits, but the new analysis indicated that extending the Alcoa power sale for 12 months should continue to benefit BPA and its ratepayers. Further extensions may be granted as long as BPA determines it would achieve equivalent benefits for the requested period.

“We believe this is a good outcome for Alcoa workers and BPA’s other ratepayers,” Wright said. “Whether it’s setting rates, managing our costs or providing service, we are well aware of the positive impact we can have on our regional economy.”

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