Rising prices could hurt Washington state economy

Wednesday, March 14th 2001, 12:00 am
By: News On 6

OLYMPIA, Wash. (AP) _ Rising energy prices could cost Washington state households $1.7 billion a year and cut job growth by a third, according to a report prepared by state budget officials.

The report, released by the state's Office of Financial Management, offered a worst-case-scenario analysis of the possible impact of rising power prices.

Electricity in Washington costs 20 percent more than it did in May, and natural gas prices have risen by more than 60 percent.

Energy prices are expected to continue spiraling upward, especially as a near-record dry spell cuts into output at the state's many hydroelectric plants. The dry weather could force energy prices up by more than 50 percent, according to the state analysis.

The report was based on the assumption that no more energy conservation or new power generation will be pursued _ a situation state officials are trying to avoid. The governor is pushing a conservation campaign, and several new power projects are in the works.

But those moves may be too late to save the state's many aluminum smelters, which use massive amounts of electricity.

``Those high prices simply would not allow aluminum production to resume or continue,'' said Robin King, vice president of public affairs for the Washington, D.C.-based Aluminum Association.

Aluminum companies built plants in the Northwest because of the region's cheap and plentiful power. But the Bonneville Power Administration _ which supplies power for utilities in Oregon, Washington, Idaho and western Montana _ has forecast that its power rate for aluminum smelters will jump from $22 per megawatt hour to $41.

According to the state report, the aluminum industry has said no smelter in the region will make a profit once power rates top $35 per megawatt hour.

In 1998, the aluminum industry employed 7,000 people in Washington. Rising energy prices have slashed the industry's work force to 5,000. Another 2,000 jobs will disappear in the next two years, said state economist Chang Mook Sohn.

``We believe it will be permanent rather than just temporary,'' Sohn said.

Many plants have already laid off employees, finding it more profitable to sell electricity than to make aluminum with it.

``Our plant has been basically flushed down the toilet,'' said Wayne Bentz, head steward of the Steelworkers Local 329. He and about 600 other workers from the Kaiser Aluminum Mead plant have been laid off while the plant sells its electricity.

State officials and energy experts stress the worst-case scenario may not come true. Everything from the weather to energy-saving consumers could change the picture.

``This is all guesswork,'' BPA spokesman Hugh Moore said. ``Our ability to predict over the next five years is very poor.''