BPA buys back 420 MW from smelter

By the OGJ Online Staff

HOUSTON, Mar. 5, 2001—In a novel arrangement, Bonneville Power Administration (BPA) will add 420 MW of power during this tight supply year by buying electricity back from an aluminum smelter that will temporarily curtail production.

The Northwest’s federally owned power producer said it will pay less than half the market price for the electricity the Reynolds Metals’ Longview, Wash., smelter would have used. A McCook Metals LLC unit is purchasing and renovating the Longview smelter, previously owned by Reynolds Metals Co. and Alcoa Inc.

The deal allows the former Reynolds facility to shut down and workers to be compensated. It also saves BPA from having to buy power on the spot market. BPA said it hopes this contract will serve as a model for other aluminum plants during a period of drought and high wholesale power prices. The Pacific Northwest is experiencing a near-record low water year and soaring energy prices.

It expects to be 3,000 MW short by this winter. BPA generates nearly 11,000 MW of hydroelectric power that it sells to area utilities. It must balance power needs with federal environmental requirements of river flow to preserve the region’s salmon.

“Not having to serve this load next winter [2001] is a tremendous benefit to Northwest ratepayers because we will not have to go out and buy power on the open market,” said acting executive director Steve Wright

BPA was able to get such an attractive price because unlike other aluminum smelters, Reynolds Metals did not have remarketing rights in its contract with BPA, explained Wright.

McCook will use revenue from the power sale to secure financing for renovations and to provide full wages and benefits to its employees during the curtailment. McCook is one of the largest aluminum platemaking companies in the U.S. supplying products for aerospace and defense industries.

McCook will voluntarily curtail some portion of output at the Longview plant for 16 months. Between Mar. and Sept. 30 of this year, BPA will purchase power from the smelter.

Between Oct. 2001-April 2002, BPA will get all the power back from McCook at virtually no cost. In April 2002, BPA will supply McCook 100 MW for plant operation. But the company agreed to make no more demands of BPA’s electricity by 2006. In the meantime, it will develop with Enron Corp. a 500 MW power plant to self-supply electricity.