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 # 338  

 May 2001




Energy Crisis Spreads: Aluminum Industry Faces Shutdown, Layoffs Due to Electricity Shortage

by John Carlisle

 

A federal agency wants to throw 30,000 people out of work and sacrifice a $4.4 billion industry.

At issue: electricity. Or, rather, the lack of it.

In a case that puts the lie to critics who say President George W. Bush and Vice President Richard Cheney are wrong to say this nation faces an "energy crisis," the Bonneville Power Administration (BPA), which provides electrical power to the Pacific Northwest, has decided to stop selling electricity to that region's aluminum industry, effective October 1.

The decision, which the BPA defends as necessary because the demand for energy has outpaced its supply, would mean an end to 7,500 aluminum jobs and 23,000 jobs in related fields.1

It also confirms the prediction that the electricity crisis faced by Californians also will hit other states.

The BPA made the mistake of over-promising electricity to customers - pledgng to sell more than it can produce. To rectify its error, the agency now faces the option of refusing to sell energy to certain customers or to spread the pain among all customers equally. It has chosen the former.

If its decision stands, it will put a sudden end to the region's extensive, 60 year-old aluminum industry.

BPA officials say the situation is not so serious - that they'll allow the aluminum smelters to restart in two years. But this assumes the energy crisis will have abated in two years, to say nothing of the fact that aluminum workers will suffer direct harm from two years of lost paychecks.

Industry officials say, too, that it is not a simple matter to shut down and then restart an entire industry. Companies will incur huge costs during shutdown from maintenance, utilities, debt service, insurance, taxes, environmental upkeep and other costs. Severe disruptions will occur in relationships with suppliers. Aluminum workers will have no choice but to leave the industry and in many cases the region, leaving a shortage of skilled employees. Says one aluminum worker: "The longer we are down, I feel that we are doomed as an industry out here."2

Some believe the sacrifice of these workers is for the greater good. A Seattle Times editorial says the death of the region's aluminum industry will keep wholesale energy price increases at 38% over a five-year period as opposed to 91%. According to the Times, keeping those aluminum jobs represents an unfair "tax" on the region.3

Perhaps newspaper editorialists and the BPA should consider just how taxing it is to pull the plug on an industry that provides an economic livelihood to so many workers and communities.

A typical aluminum job pays $58,710 per year in salaries and benefits. Moreover, many aluminum plants are located in rural, economically-challenged communities that can ill-afford to lose such good incomes.4 If aluminum plants in Goldendale, Washington close, the unemployment rate in Goldendale and the surrounding county would soar to 30%. Two plants in Spokane employ 2,180 workers and provide $151 million in income. An additional 7,280 Spokane jobs depend on the plants.5

Goldendale Mayor Mark Sigfrinius says that human element should be borne in mind before the BPA declares war on the aluminum industry. "The energy crisis is a serious issue for people all over Washington and the Northwest," says Sigfrinius. "But one thing we should not do is to pit electrical ratepayers or communities against each other. Unfortunately, that is exactly what is happening."6

The aluminum industry did nothing to deserve this treatment. All parties agree that BPA is at fault for overpromising power. Jerry Leone, manager of the Public Power Council, which represents 114 consumer-owned utilities, says, "They promised everything to everybody. Bonneville got themselves into one horrible mess, and it is harming their customers because of it."7

Ironically, by targeting the aluminum industry, BPA is punishing the customer that has demonstrated the greatest improvement in energy efficiency. Since 1995, the aluminum industry has cut its megawatt usage in half from 3,000 to 1,500 megawatts.8 The biggest increases in usage come from Washington's internet-driven high tech economy.9

Of course, the plug should not be pulled on the high tech economy. Rather, any solution - and there is no easy, cheap solution - must be one that spreads rate increases equitably so energy-intensive industries aren't disproportionately affected.

BPA's drastic proposal to shut down the Pacific Northwest's aluminum industry poignantly illustrates President Bush's warning that, unless steps are taken now, the country faces a bleak future of rolling blackouts and shuttered businesses. How many more businesses have to be closed and jobs lost before people get the message? The energy crisis is real, and the case is strong for Bush's plan to increase domestic energy supplies.


Footnotes:

1 Tom Detzel, "Aluminum Companies Continue to Blast BPA," The Oregonian, May 11, 2001.
2 Paul Nyhan, "Will Power Crunch Kill Aluminum Industry," Seattle Post-Intellingencer, April 11, 2001.
3 "Big Aluminum's Power Plan Doesn't Sell Here," Editorial, The Seattle Times, March 13, 2001.
4 Mark Sigfrinius, "The Energy Crisis Doesn't Begin and End in Seattle," The Seattle Times, April 5, 2001.
5 Richard S. Conway, "The Washington State Aluminum Industry Economic Impact Study," Prepared for the Pacific Northwest Aluminum Industry, August, 2000.
6 Sigfrinius.
7 Lynda Mapes, "Utilities Scramble to Cut Power Use," The Seattle Times, April 11, 2001.
8 John Wilson, "'No Special Deals' Campaign," Memo, Northwest Power Alliance, May 10, 2001.
9 John Webster, "A Fair Approach To Energy Crisis," Spokane Spokesman-Review, April 29, 2001.


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John K. Carlisle is director of The National Center for Public Policy Research's Environmental Policy Task Force. He can be reached at [email protected].



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