06/28/2000 Power rates sting businesses Soaring electricity prices force plants to lay off staff, make production changes

Al Gibbs;

A new round of skyrocketing wholesale electricity prices has forced one Tacoma industrial plant to cut back production and lay off some workers.

Another plant manager is concerned for the very survival of his business and its 200 workers.

And the Bonneville Power Administration is running Grand Coulee Dam at peak production but still figures it will pay some $25 million to buy energy to keep the lights on for the rest of this week.

"The folks out here who use a lot of (electrical) power to make things are not going to survive if this keeps up," said Rich Zgol, general manager of Abitibi Consolidated Sales Corp.'s Steilacoom paper plant.

Consumers haven't yet felt the economic sting of higher power rates. But they could if utilities are forced to raise rates or if higher power prices force some industries to close their doors.

The price of electricity during hours of peak use zoomed to $750 per megawatt hour on California wholesale markets during the past two days. It went even higher - to $800 at times - on the Mid-Columbia Power Exchange.

The reason: Four of the region's large thermal generating plants, including its only nuclear power station, unexpectedly went out of service Monday, dropping as much as 3,000 megawatts of power from the West Coast's energy distribution system.

Peak prices in California jumped $100 per megawatt, to $400, within minutes.

The average price for power at this time a year is usually $10 to $20 per megawatt hour.

"We can't make money if power costs more than $100 a megawatt," Zgol said.

Pioneer Chlor-Alkali's plant on Tacoma's Tideflats is operating at half-capacity during hours of off-peak power pricing, and only 20 percent of capacity during peak demand hours in the morning and evening, said plant manager Larry Landry.

Eight temporary or contract employees, all clerical or engineering drafting workers, have been laid off, Landry said.

"It's a time when we really need to trim our sails if we're going to get through this storm," he added.

Abitibi is operating its major pulp-making system only during the nighttime hours when demand for electricity, and prices, are low, Zgol said. Its pulp-recycling system, which uses far less electricity, continues to operate normally.

"It's not a very comforting feeling, but that's the only way we can exist," Zgol said.

Price spikes could get even worse after July 1, when Abitibi's current electric supply contracts expire.

There have been no layoffs at the plant in the past year, and Abitibi, The News Tribune's largest newsprint supplier, hasn't cut production.

"But it may be a thing we have to do down the road," Zgol said.

There are about 200 workers at Abitibi's plant.

Three aluminum plants in Washington already have slashed production or closed down entirely. Vanalco Inc. in Vancouver, Wash., laid off 450 workers, while Kaiser Aluminum Corp. laid off 400, including 280 in Tacoma, and 120 in Spokane.

"I haven't heard of any others, but it's got to be getting close" for some other energy-intensive industries in the region, said Ed Mosey, spokesman for the Bonneville Power Administration in Portland.

Bonneville sells about half of this region's electricity - energy from dams on the Columbia and Snake rivers and the Columbia Generating Station, the state's only nuclear plant.

That plant started a series of shutdowns about 8:30 a.m. Monday when a relay failed between the generator and the transformer yard, "scramming" the entire plant in seconds.

Columbia is operated by Energy Northwest, the former Washington Public Power Supply System.

Its loss cost the region about 1,150 megawatts - a bit more than the power consumed in Seattle.

As a public agency, Energy Northwest must reveal operating information.

Not so the investor-owned utilities involved with three coal-fired plants that also went out of service Monday. They wouldn't even confirm that the plants had gone down, much less when they'd be returned to service as temperatures rose along the West Coast and demand for electricity for air conditioning rose with them.

"For very significant and important business reasons, we don't release that information," said Jerry Allen, a project engineer at the Centralia plant.

"That's confidential market information," added Dave Kvamme, a spokesman for Pacificorp, which owns shares in the others. "Pacificorp has a policy of not discussing the status of its generating units."

Industry sources said the plants were a 650-megawatt unit at Centralia, a 700-megawatt unit at the Jim Bridger power station in Wyoming and one of four units at Colstrip in Montana. All feed power into the Northwest's transmission and distribution grids.

Whether the coal-fired units were back on line Tuesday, or when they would return to service, was unknown. The owners wouldn't say.

Columbia Generating Station will return to service later this week, Energy Northwest spokesman Don McManman said.

"The goal is to have it up by Friday," he said.

The price spikes have generated real concern about the long-range impacts on the Northwest economy, which is supported in part by manufacturing plants that use large amounts of electricity.

"I think the gas prices in the Midwest are inconsequential to what we're facing here," Pioneer Chlor-

Alkali's Landry said.

"If we can't mitigate these prices, in the long haul we can't continue production," Abitibi's Zgol said.

Added Bonneville's Mosey: "It's wild. One wonders if this is the future."

http://www.tribnet.com/body.asp

-- Martin Thompson (mthom1927@aol.com), June 28, 2000