Kaiser Aluminum expected to pull the plug soon on Northwest

SPOKANE - United Steelworkers Local 329 President Dan Russell, a 33-year Kaiser Aluminum employee and skilled crane operator, is doing janitorial work cleaning offices at Kaiser's Mead plant in Spokane, Wash.

Because of seniority, he's one of the luckiest - just 36 union members are still working at Mead; 520 others are on layoff.

The employees are on layoff because Kaiser is reselling electricity from Bonneville Power Administration (BPA) instead of using it to make aluminum. In a tight market, the federal agency is having to buy electricity at as much as $250 a megawatt hour. It then sells it to Kaiser at a contractual rate of $22.50 a megawatt hour. Kaiser then turns around and resells it to a third party for the market rates, like $250 per megawatt hour. It has a contractual right to do this until Oct. 1.

Why do companies like Kaiser have this right to resell? It dates back to 1995, said Jeff Stier, BPA vice president of national relations and a former aide to U.S. Representative Peter DeFazio, D-Springfield.

"Back then, the BPA was in a panic over competitiveness," Stier said. Because of the need to pay for salmon restoration and debt on a series of failed nuclear plants, BPA's prices were higher than the rates on the wholesale market for electricity, markets which had been set up by the 1992 Energy Policy Act. Many large customers were bailing out of BPA power and heading for the market, leaving the BPA's fixed costs spread on even fewer shoulders.

So the BPA negotiated hard to keep customers, and experimented with new terms. One was the "take or pay" contract, which three large customers - Kaiser Aluminum, Columbia Falls and Golden Northwest opted for. Under "take or pay," companies were obligated to pay for a given amount of power, but had the right to resell power they didn't use. No one foresaw a situation in which the market would skyrocket, turning aluminum smelters into energy brokers selling public power.

Kaiser is obligated by its union contract to pay 70 percent of the wages for about 420 of the laid off workers - those who have at least 10 years at the company. But the rest it has thrown to the wind, Russell said.

The BPA has been pushing hard to get the company to provide for its workers and share its profits with the agency, as Columbia Falls and Golden Northwest have done. Kaiser is refusing. As a result, the BPA is threatening to cut off the company's access to the cheap power once and for all come October.

But it's a threat, Russell thinks, the company will probably continue to ignore. He says Kaiser is showing every indication that it intends to pull the plug on its Northwest operations as of October. At its Tacoma plant, also shuttered, it's not even performing preventative maintenance, he said - turning the machines on and off periodically so bearings and shafts don't go flat.

"Kaiser appears to be interested in taking the money and running," Stier concurred.

Kaiser's boss is Houston financier Charles Hurwitz, who has a record of being anti-union and anti-environment.

March 2, 2001 issue

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