A plan to re-market electricity in Oregon will help to build a $100 million wind power investment in the Pacific Northwest.
PORTLAND, Oregon – Golden Northwest Aluminum Inc purchases electricity under contract from Bonneville Power Administration (BPA) to produce aluminum at its smelters in Goldendale, Washington, and The Dalles, Oregon. The company will curtail production at the two facilities and resell the electricity at current market rates. The re-sale will generate $400 million in revenue, depending on market prices. Under the company’s agreement with BPA, proceeds from the sales would be used to invest up to $100 million in a wind energy project and a gas-fired combustion turbine that will benefit the regional power grid. The company will also dedicate up to 25 percent of the proceeds to help BPA defray its costs of operating in the current market, which is characterized by high and extremely volatile costs. It will continue to pay wages to employees of the smelters during the period that the smelters are operating at a reduced level of production and will cover the costs of curtailing operations at the plants. “This transaction will mean economic security for workers, better long- term prospects for the smelters and, we expect, more energy for the region,” says U.S. Energy secretary Bill Richardson. “If other Northwest aluminum producers curtail production in the next few months, they should look to this agreement as a model.” Kaiser and Columbia Falls Aluminum have similar re-marketing rights under their contracts with BPA. The contracts allow them to re-market power in order to mitigate risk of having to purchase BPA power when aluminum markets are poor and production is curtailed. The contracts were signed in 1995, before deregulation allowed power prices to rise to the high level of recent months. “The revenues will help offset BPA’s increasing costs due to skyrocketing market prices,” adds BPA administrator Stephen Wright. “The proceeds will also help Golden Northwest Aluminum to deal with higher electricity prices in the next few years. In the longer term, the revenue should help the company to secure its own sources of power so that it no longer has to rely on direct purchases from BPA to operate economically.” The agreement was necessary because of the unprecedented high level of price volatility in west coast markets, says Brett Wilcox of Golden Northwest. The company reduced production by 40 percent in September due to the rising cost of non-BPA power needed to run the plants at full capacity. In this current round of curtailments, production is being cut back to 10 percent of capacity. Under the agreement, Golden Northwest will invest in new generating facilities but may purchase power if such purchases appear to better serve the company’s interests.