Kaiser will shut down aluminum production

Here's how bad the Northwest's power crunch has gotten: Kaiser Aluminum officials have decided they can make more money selling their power than they can producing aluminum.

The company announced yesterday it will stop all aluminum production in Washington state for the next 10 months and begin selling back to suppliers the electricity it would have used in its smelter plants. The move will completely shut down the company's Spokane smelter, resulting in the layoff of 400 workers.

Kaiser already had cut back production in the summer and again last month. Its Tacoma smelter has been closed since June.

This latest move includes a new twist with the power-supply sale. By selling its December power alone, Kaiser will make $52 million--a windfall for a company that lost $54 million last year after a prolonged strike by workers. Before its labor troubles, Kaiser posted a profit of $60 million in 1995.

"We're an aluminum producer. That's what we want to do," said spokeswoman Susan Ashe in Spokane. "Right now, the economics are such that you can make much more money selling power than you can producing aluminum."

Also yesterday, a Northwest power-planning group agreed to maintain a warning of a so-called "stage 2 alert" for power supplies throughout the region. That means utilities are asking customers--businesses and homes--to voluntarily cut their consumption. A formal stage 2 alert, as opposed to a warning, would mean mandatory cutbacks by certain groups, mainly businesses that negotiate power contracts that can be interrupted in emergencies.

Although the weather is milder than expected, power is still tight enough to keep the warning in effect.

Similar warnings have been in effect up and down the West Coast. In California, which is seeing the worst shortages, people have been warned to expect blackouts or enforced "rolling brownouts," in which power is cut to certain areas to conserve.

The shortages have been blamed on low rainfall in the Northwest; on high demand in California, which typically sells power to the Northwest in the winter; on the shutdown of some California power plants for repairs, and on a lack of power-plant construction in the Northwest to accommodate the region's growth.

In addition to Kaiser's move yesterday, a few developments took place over the weekend:

** Federal agencies said they would release more water upstream from power-generating dams, allowing an increase in power generation. The move could mean less water is released next spring for young salmon migrating downstream.

The greater release now may exceed recommendations for protecting salmon runs under the Endangered Species Act but is necessary to accommodate demand for electricity this week, said officials with the Bonneville Power Administration, which supplies about 40 percent of the region's electricity.

** California's power planners continued urging voluntary cutbacks by consumers, calling on residents to keep their holiday lights off until 7 p.m. Washington residents have been urged to wait until 8 p.m.

** Regional natural-gas utilities, including Puget Sound Energy in Bellevue and Avista in Spokane, asked state regulators Friday for large rate increases. The proposed increases--25 percent for the average Puget Sound Energy household--come after similarly large increases a few months ago. Puget Sound Energy raised rates by more than 27 percent in September.

The Washington Utilities and Transportation Commission is expected to rule on the requests Jan. 11.

This morning, as people wake and prepare for work, power demand should hit a peak, Badley said. Wednesday also is expected to be tight because, according to forecasts the utilities use, the weather should reach its coldest point that day. Forecasts call for warming by Thursday or Friday, easing the power crunch.

That won't matter to Kaiser, though. The company is waiting until October to restart its plants because that's when its new power contract with the Bonneville Power Administration will take effect. The company will use proceeds from selling power now to help pay for that contract, which has rates at least 35 percent higher than those it has been paying.

The $52 million Kaiser will get from its December power sale also will help pay up to 70 percent of base pay for laid-off workers, at least for part of the 10-month Spokane plant closure, Ashe said. The company will provide full medical benefits and will continue pension payments for the entire period.

Kaiser is not alone in its dramatic response. Georgia-Pacific is temporarily closing a paper mill in Bellingham and laying off nearly 800 workers.