Negotiations between Alcoa and BPA for a seven-year power contract that was due to be finalized by September 30 recently hit a road block. In an 11th hour move, BPA is requiring conditions that place additional risk on Alcoa. This is not acceptable and BPA’s position needs to change.
Time is of the essence and we must get this issue resolved by the original September 30 timeframe. Due to this fast-approaching deadline and BPA’s unwillingness to strike a compromise, we are left with no choice but to engage our elected officials in the debate once again. We have asked our employees to write to the Governor and federal officials and would be grateful if you would do the same.
Below is a factsheet that provides you with the contacts of the elected officials and key messages to consider incorporating in your communication. We would like to get this effort moving very quickly and if at all possible, it would be terrific if you could send an email in the next two days.
It is difficult for us to ask you to do this again, but we have been left with no choice – BPA is hiding behind a court ruling that is not relevant to the contract we are negotiating and we are going to need some help to shift them from this position.
You can use the same letter for each official, and a sample can be found here. A phone call to Governor Gregoire’s office is particularly important. Please don’t hesitate to leave a message.
Suggest points to cover:
·Highlight you were disappointed to learn that the contract negotiation between Alcoa and BPA has reached an impasse and that you are once again concerned for these important Whatcom County jobs.
·Acknowledge the work BPA has done to develop a draft contract that will provide the plant with the opportunity to be a part of this community/the region for at least the next 7-years but stress that you are now concerned this work will be undone by BPA as a result of the recent 9th Circuit Court ruling regarding the amendment contract Alcoa was operating under.
·Express your regret and concern that the ruling has caused BPA to unnecessarily change the terms of the 7-year contract to include an unreasonable termination clause and that unless something changes, it appears unlikely resolution will be struck by the September 30 deadline originally put forward by BPA.
·Highlight that this court ruling is not reason to place additional risk on Alcoa, but to bring the negotiation to a rapid conclusion so that BPA can supply Alcoa with physical power at the IP rate as the Court has ruled it has the discretion to do.
-Highlight that the IP rate is around 25% higher than BPA charges preference customers in the region.
·Remind the recipient of the importance of protecting these existing jobs in Whatcom County at a time when the country continues to feel the devastating impacts of the economic crisis.
-Highlight again the importance of these jobs to your organization/business.
Remind the recipient of the need to treat all constituents in the region fairly and equitably.
-BPA’s mission states that its role is to serve power and deliver value to NW customers and constituents. Alcoa is a 70 year customer that deserves to be treated like every other customer.
-We are not asking for special treatment. We just want to be treated like other NW power customers so that we have the same opportunity to survive.
Urge to take action to ensure this matter is successfully resolved by September 30.
Do not delay. Please submit your comment as soon as possible.
U.S. Court of Appeals for the Ninth Circuit Court Ruling
On Friday August 28, the U.S. Court of Appeals for the Ninth Circuit Court held that BPA's current monetized sales contract with Alcoa (January – September 2009) is invalid. On the other hand, the ruling supports the sale of physical power to Alcoa at the traditional Industrial Power (IP) rate as proposed in the draft 7-year contract, currently open for public comment.
Alcoa is pleased that the court has upheld our long-held believe that physical power sales are the most appropriate way to serve DSI loads.
Here is why the Court’s opinion justifies a physical power sale at the IP rate:
üThe court held that BPA has the discretion to serve physical power to Alcoa at the IP rate.The proposed contract does just that.
üThe court held that the sale of power should be based on ‘sound business principles’. The following points related to the sale of physical power to Alcoa meet this test (in fact, some were cited by the court in its opinion):
-Under the proposed contract BPA obtains valuable transmission and power reserves from Alcoa;
-Alcoa would take power in flat blocks that require little or no shaping by BPA;
-Alcoa takes BPA power at a consistent rate, including during light load hours, when power has historically been difficult to market;
-The IP rate to be paid by Alcoa is $8/MWhr higher than the preference customer rate and helps pay for the cost of the residential exchange that cannot be included in the preference customer rates;
-Alcoa is a long-term historical customer that has helped pay for the establishment of the NW power system and in the past has paid higher than market rates for power. It would be contrary to a ‘sound business principal’ to discontinue sales to such a customer.
üThe court has stated that surplus power should be sold in the region at the IP rate before it is marketed outside the region and stated that it would be a ‘sound business principle’ for BPA to make such IP rate sales in order to free- up power sales outside the region. The proposed contract does just that.
-In 2008, BPA’s sales outside of the region were valued at almost half a billion dollars.
This ruling reaffirms the determination made by the same court in December 2008; the physical sale of power to Alcoa, at the IP rate, is the most appropriate path forward. BPA should continue with the current process to bring this negotiation to a close by September 30.
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