Union workers bend ears of Wyden, Blumenauer on energy crisis concern

By DON McINTOSH, Staff Reporter

When Oregon Senator Ron Wyden arrived at the Machinists Hall Jan. 16 for a forum about electricity prices, he was met by more than one hundred worried faces. Most were union members employed by Atofina Chemicals, Inc., a Portland manufacturer under serious threat from high market prices for electricity.

"My job isn't being threatened by lack of sales or a recession," said Bob Rader, Atofina employee and president of Chemical Workers Local 109-C. "The future of me and my family is being threatened by my own government's energy policies."

The meeting with Wyden and Congressman Earl Blumenauer was an appeal for help in averting the consequences of a job-killing energy crunch that's set to take effect, for Atofina, in October. It was arranged by the Northwest Oregon Labor Council on behalf of union workers at Atofina. Five locals represent workers there under a contract with the Portland Metal Trades Council.

October is the start date, for all Northwest energy customers, of the new five-year electricity contracts with the Bonneville Power Administration (BPA). Atofina is one of about a dozen large users of electricity known as "Direct Service Industries (DSI)" that get electricity directly from BPA, which generates it at one nuclear plant and 28 hydroelectric dams on the Columbia and Snake rivers.

DSIs get BPA power "at cost," which, since water is free, has up to now been extraordinarily cheap - about $22 per megawatt hour. But a combination of low rainfall and increased demand has changed the equation - Bonneville's own generating capacity is no longer enough to supply all the power it's obligated by past contracts to provide Northwest power customers. That means the agency has had to buy power from other suppliers on the wholesale electricity market, a market that has witnessed ferocious price hikes in the last nine months as a result of the California electricity crisis.

"I'm not going to let Oregon be a scapegoat for California's energy problems," Wyden told the assembled workers and their families.

Atofina and the other DSIs are being pinched in multiple ways: the price the BPA charges them for power is expected to rise as much as 60 percent, and the agency is planning to cut in half the amount of power it commits to the DSIs, meaning they may have to pay even higher market prices for the remainder of their needs.

At the Jan. 16 meeting, Atofina president Larry Farmer suggested, rather than have the BPA raise its prices the fullest amount, that the agency be allowed to run in the red for a while until new generators were built under a streamlined permitting process. That way, cheap power could be kept flowing. But Representative Blumenauer said congresspeople from other parts of the country that pay much higher rates would not look kindly on such a proposal.

In fact, Wyden and Blumenauer said, there's a real risk that other regions, envious of the Northwest's historic cheap power, may soon seek to privatize the BPA or distribute its benefits more broadly outside of the region.

To head off this possibility, Blumenauer said he wants to work with other elected officials to build consensus on a proposal for the federal government to sell the BPA to a consortium of Northwest states.

"That's the best way to preserve it - to own our own system," Blumenauer said.

The Portland congressman plans to raise the issue at an early February meeting in Washington, D.C., between Oregon Governor John Kitzhaber and the Oregon congressional delegation. Farmer said Atofina would like to have the same amount of power it's getting now - 84 megawatts - at the same price. That too is not likely to happen.

Under the Northwest Power Planning Act of 1980, the BPA's obligations to Northwest electricity customers were prioritized. First in line are public utility districts (PUDs). The BPA is obligated to provide them, in five-year contracts, all the power they request that they can't generate themselves. Next are the investor-owned utilities (IOUs). These the BPA isn't obligated to provide power to, but it must ensure that residential customers in IOUs pay the same rates they would in PUDs. The BPA does this by providing low-cost power to the IOUs, or by writing them a check to make up the difference in rates. Last in line for BPA power are the DSIs. The BPA has no fixed obligation to provide them power, just a historic practice of doing so.

This arrangement sets up an unfair situation, Farmer argued. A direct Atofina competitor, Pioneer Chemical, is located in an area served by Tacoma Public Utilities. That means it can get access to unlimited amounts of at-cost BPA power because Tacoma is a PUD, whereas Atofina, a DSI located in an IOU district, will have to go to market for most of its power.

"We have to go to market in October to buy 60 percent of our power, and we can't do that at today's market prices. That will put us out of business," Farmer said.

Wyden, the senior Democrat on the Senate Energy Committee, said he would be willing to use his influence to eliminate this apparent inequality.

"I believe I can get you the same deal everybody else is getting," Wyden told Farmer at the meeting.

What deal that is remains to be seen, however. Five years ago, when the current long-term contracts were being negotiated between the BPA and the PUDs, IOUs, and DSIs, both Atofina and its Tacoma competitor, Pioneer, chose to give up access to cheap public power, believing they could get an even better deal on the wholesale market, where costs were lower at that time. Pioneer opted to buy all of its electricity on the market. Atofina's deal had it buying most of its power on the market, at a low fixed rate, for the first half of the five-year period, then returning to BPA for the second half. It proved to be a bad business decision for both companies - Pioneer because it was trapped when market prices shot up, and Atofina because the BPA decided to calculate the amount of power it will sell to DSIs in the next five-year cycle on how much they bought in the current one.

Pioneer, however, can now return to buying its power from Tacoma, at rates that will be equivalent to what Tacoma gets from the BPA.

Pioneer plant manager Larry Landry says Atofina has the better deal right now, because Pioneer is taking a beating in the electricity market, plus it pays nearly 10 percent in state and local public utility taxes.

Both companies have about 120 union employees, and both say avoiding layoffs is their highest priority. And the future of both is in limbo while the exact rates they'll pay are being negotiated.

February 2, 2001 issue

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