Power Rates in West Jolting Economy

Wednesday, July 12th 2000, 12:00 am
By: News On 6

SPOKANE, Wash. (AP) — From the copper mines of Montana to the aluminum plants in Oregon, companies across the West are laying off workers because of skyrocketing electricity costs.

Rising gasoline prices are tame compared to electricity rates, which have climbed to more than 40 times normal levels in the past two weeks.

Usually between $20 and $30 per megawatt hour, wholesale prices spiked to more than $1,000 per megawatt hour in late June before settling down a bit so far this month.

Could the power rates be electrocuting the economy?

Not yet, because job losses appear to number no more than a few thousand. And consumers aren't likely to feel the pinch anytime soon, since most of them get power bought under fixed contracts.

``My guess is residential consumers will not see much impact, unless their utility must buy power quickly on the open market,'' said John Harrison of the Northwest Power Planning Council in Portland, Ore.

But for many industrial users, electricity is likely to remain expensive and in limited supply this summer.

The Silicon Valley Manufacturing Group, which represents high-tech companies, last month warned that a looming power shortage could cripple the San Jose area's economy.

Rising computer use is a major reason that electricity demand is growing by about 2 percent a year, without comparable increases in power generation, officials said.

``The high-tech industry is consuming more and more power,'' said group spokeswoman Michelle Montague-Bruno. ``We need reliable supplies here.''

So far, layoffs in the West are concentrated in old-fashioned heavy industries that use a lot of power. For instance:

—Kaiser Aluminum Corp. in mid-June announced it would lay off 400 workers at plants in Tacoma and Spokane. ``Market prices for power are at levels never before experienced in this region,'' company President Raymond Milchovich said.

—Rising electricity prices were one of several factors cited by Alcoa Inc. in closing its Troutdale Reduction Plant in Oregon, which will cost 525 workers their jobs by Oct. 1.

—Montana Resources Inc. shut down its copper concentrator in Butte on July 1 because it could not afford the electricity price, and planned to close its copper mine soon, said company lawyer Ron MacDonald. Montana Resources employs 350 workers. It faced an increase from about $35 per megawatt to $625.

``It's impossible for us to run a business with those kind of losses on a monthly basis,'' MacDonald said.

As a result, Sen. Max Baucus, D-Mont., asked the Justice and Energy departments to investigate the price jumps.

Reasons for the electricity increases include hot weather in California and the Northwest that increased demand, while production at hydroelectric dams is lower than normal because of low river flows.

Also, the unplanned outages of major power plants in Washington, Wyoming and Montana knocked out enough power recently to supply three cities the size of Seattle.

``This is the state of the power system throughout the West Coast,'' said Judi Johansen of the Bonneville Power Administration, the federal agency that markets much of the Northwest's electricity. ``Power supplies are having difficulty keeping up with demand, and our transmission systems are stressed out.''

Deregulation of the electricity market — allowing buyers and sellers to seek the best deal — is also having a big impact, said Larry Cassidy, chairman of the Northwest Power Planning Council.

The planning council contends the Northwest needs more electrical generating plants, but prospects for building them are slim because deregulation has eliminated guarantees that utilities will be repaid for their investments. No new plants have been built here for a decade.


On the Net:

Northwest Power Planning Council: http://www.nwppc.org/welcome.htm Silicon Valley Manufacturing Group: http://www.svmg.org

Bonneville Power Administration: http://www.bpa.gov/indexmain.shtml