Dec. 26, 2000Norsk Hydro ASA will curtail production at its aluminum smelter in the Pacific Northwest preferring to sell electricity instead of aluminum.
Norsk Hydro�s curtailment of 75% of its production comes on the heels of Kaiser Aluminum�s shutdown of its smelter outside of Spokane, Wash. Last week.
Norsk said the curtailment of production would last 9 months. The company will continue to pay its employees wages and benefits through the curtailment. The smelter will reduce annual production from 105,000 metric tonnes of aluminum to about 27,000 metric tonnes.
The electrical power the smelter buys from Bonneville Power Administration will be sold back to BPA helping �ease� the current electric power crisis in the Northwest, Norsk said in a release. Norsk has a tolling arrangement since 1987 with Goldendale Aluminum Co. that owns the plant. Goldendale and Hydro have agreed to a financial transaction so Hydro will be compensated for its costs, investments, and metal.
Most observers agree that the Pacific Northwest is short of about 3,000MW of power. Freeing up about 260 MW from the Goldendale plant is a step towards meeting that shortfall in the short term, says Ed Mosey, spokesman for BPA.
But BPA is working on a deal that will ensure that the owners of Goldendale and Norsk do their part to alleviate the electrical crisis in the region.
�We think that an appropriate use for the resale revenues is investment in new generating plant,� Mosey says.
Legally, the aluminum companies have a contract with BPA to buy power directly from the federal entity and resell it at market prices. The windfall profit amounts to hundreds of millions of dollars.
Sources close to BPA say the aluminum companies purchase power on contract from BPA at about $23/ MW-hr and can sell it back at current market prices. The current market prices have soared to $500 or $600/MW-hr.
�The legal thing is one thing. But we all know what the right thing is,� says Mosey. �We are trying to structure a deal to get as much benefit as we can for the area�s ratepayers.�
He warns the aluminum companies that the windfall will have to be used to help relieve the crisis in the Northwest and to pay wages for their employees to keep the local economy whole or they will not be in a good business position in this region going forward.
Kaiser Aluminum has not agreed to share any of the profits with area ratepayers or invest in new electrical generating plant.
�We are not giving up on Kaiser yet,� says Mosey.
No other industry has the privilege of buying power direct from BPA at wholesale prices except the aluminum industry, he says. This arrangement was begun after World War II so the aluminum companies would remain viable in the region.