Who gets BPA power: smelters or utilities?

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Public utilities say nearly 60,000 jobs around the Northwest are at risk if the aluminum industry keeps its supply of cheap federal power, a ratio of five jobs lost for every aluminum job saved.

Aluminum companies say the Bonneville Power Administration owes them the cheap power under five-year contracts signed last year.

In the balance are power rates for everyone else, which the BPA says would jump as much as 300 percent if it has to buy 1,500 megawatts of power - estimated to cost $1.5 billion on the open market - for the smelters.

It's "Let's Make a Deal" time in the Northwest as the BPA, the region's wholesale supplier of electricity, is looking for power reductions anywhere it can to meet contracts that go into effect Oct. 1.

The BPA has a federal mandate to supply power first to public utilities, then to residential customers of investor-owned utilities. Beyond that, any surplus goes to whoever wants it.

To keep rates down, the BPA wants smelters to voluntarily shut down for two years while the BPA pays their employees not to work. It has also asked utilities to cut use by up to 10 percent, above and beyond any conservation efforts initiated this winter.

But aluminum smelters say they have a better idea: They want the BPA to maintain the supply of cheap public power for 75 percent of all its customers, including aluminum companies. The federal agency would then have to shop the wholesale market for the remaining 25 percent.

Aluminum companies, some of which shut down this winter when power costs jumped, can cut production to avoid buying power at market rates. Under their proposal, they would continue to receive federal hydropower for the rest of their needs, even though they have no statutory right to it.

Public-utility officials say they can't cut their use by 25 percent - they have customers to serve. Instead, they say, they would have to absorb the cost of higher-priced, open-market power, a prospect they adamantly oppose.

The smelters were supposed to be off the BPA grid by Oct. 1. But under pressure from the aluminum industry and the Clinton administration, a former BPA administrator promised the smelters power for five more years.

The BPA is trying to negotiate its way out of those contracts, saying it will supply power to the aluminum companies again once rates stabilize.

"Most of us can't easily shut down by 25 percent," said Al Aldrich, director of government affairs for Snohomish County PUD, which is scheduled to get more than 80 percent of its power from the BPA come October.

If the tiered-rate structure went into effect, Snohomish PUD estimates it would spend $124 million more a year, Aldrich said.

That means the average residential Snohomish PUD customer would pay $247 more in the coming year for electricity; the average commercial customer would pay $1,500 more; and the PUD's largest commercial customer, Boeing's Everett facility, would pay in excess of $6 million more, Aldrich said.

If the PUD chose to pass on a BPA rate increase to commercial customers only, the business rates would jump just under $5,000 a year on average, while rates for Boeing's Everett facility would jump about $15 million, according to the PUD's forecast.

"Those numbers are just frightening," Aldrich said.

Meanwhile, the Public Power Council, which represents 150 customer-owned utilities around the Northwest, estimates that 59,796 jobs could be at risk if the BPA raises its rates by more than 250 percent. Those jobs are in all sectors of the economy, from agriculture to mining, paper mills, recreation, retail, nursing homes, schools, hospitals and food processing.

"We are fighting fire with fire," said Jerry Leone, manager of the Public Power Council, based in Portland.

"We are talking about whether the region survives economically over the next two years. When the aluminum companies got cheap deals in the past, it didn't pull down the whole Northwest. This is the most egregious deal they have sought because it is at the life-and-death expense of the rest of the region."

John Arthur Wilson of the Northwest Power Alliance, which represents aluminum companies and business interests, blames the BPA for the mess.

"You are looking at a total lack of planning and now you have a federal agency coming after the aluminum industry because they need a scapegoat."

Lynda V. Mapes can be reached at 206-464-2736 or lmapes@seattletimes.com.