Subject: Western Issues 8/10/01
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Fri, 10 Aug 2001 14:37:52 -0700 (PDT)

The following update has already been forwarded to Tim Belden.  Please let me know if you have any questions.

Thanks,
Kristin Walsh x39510

Aluminum Smelters (DSI's)

Kaiser Aluminum
Kaiser Aluminum has begun the recall of 40 to 50 workers to its Mead smelter in Washington.  They are beginning the process of getting their operations back into productive capacity as they await load reduction negotiations with BPA - perhaps using the recall as a posturing tactic to threaten restart.  Kaiser wants BPA to give them $17 per megawatt hour to shut down operations for two years beginning October (competitors are being paid $18-$20), but it seems unlikely that BPA will budge now that spot electricity prices have reached reasonable levels in the 50MWh range.  To make a long story short - Kaiser botched their chance at a great deal and is now lining up the troops to threaten BPA into signing.

Alcoa Aluminum
Alcoa is still in talks with BC Hydro in regards to restarting its Intalco smelter operations.  Consequently, the bottom line with the BPA load reduction agreement priced in at $18-$20 per MWh and a rough estimate of $30 per MWh break-even point on electricity prices - Alcoa could go to BC Hydro with a much more aggressive bid on electricity.   With current market prices floating near $50 per MWh and a $20 MWh load reduction payment from BPA for the next two years, there is a very real possibility Alcoa could profitably restart operations if prices break lower and find a stable price there.

Contacts close to BC Hydro are aggressively pursuing the inside track on these negotiations, particularly on the Hydro's side of things.  We are aiming to find out a potential restart date and will report when available.

BC Hydro

BC Government
BC Government has been allowed to gain intervener status in discussions regarding the Sumas-2 power plant sitting in Northern Washington State near the Canadian border.  This border dispute has been going on for the last 18 months, the Canucks citing air pollution as a major public health hazard coming from a site so close to Canadian cities.  Now the BC government has been allowed to sit in on sitting negotiations and provide its input - a large step forward for BC now that the NDP has been stripped of power.

On the offshore drilling front, there has been no direct legislation this week, although it is believed that the Greens and the remnants of the NDP environmentalists are on the ropes on this issue.  Sources indicate that the labor-environmentalist split that took the House Democrats on the ANWR vote in Washington last week will likely mirror itself in the offshore drilling and forestry debates in British Columbia.  Many labor groups have allied themselves with corporate interests in the past and are likely to do so again if the issue of oil royalties and jobs are at stake in Northern British Columbia.

BC Hydro
There has been no real movement this week on the BC Hydro front.  They are awaiting the selection of their new Chair and Board upcoming by mid-September.
Bonneville Power Authority

Financial Solvency
Senator Patty Murray has stated she will go to the mat on the ANWR debate and that there will be no room for equivocation on this front.  Whether or not this opening salvo is meant as deterrence or smokescreen remains to be seen, although a reliable source suggests she is not willing to change her position in exchange for increased BPA funding.  Sources indicate that the bill before the Senate to increase BPA's funding by $2 billion to a total $5.75 billion with the provision of annual reports to the Senate was opposed by GOP leadership in the Senate and by the White House.  It is likely that Murray would scrap the bill altogether unless a viable alternative emerges.

FERC Oversight
There remains a question as to whether or not Chairman Hebert's resignation at FERC will play a role in Murray's decision-making.  It is our understanding that upon Hebert's resignation, a vacancy will open in FERC, and there are no restrictions to its partisanship since the Commission will have two Democrats and two Republicans in it.  That opening creates an opportunity for some individuals who were initially passed over the by White House to have another shot at becoming a FERC Commissioner.

We are entertaining two scenarios:

?	The White House looks to use the FERC vacancy to gain influence in the ANWR vote, should labor's influence not be strong enough to swing a victory.
?	The White House is confident of the ANWR victory and will appoint a Republican to the position - most likely a contender on the short list being someone who was passed over recently in favor of Woods.

Spill Issues
There are no additional spill issues that have been brought up this week.  We are not expecting anything substantive until the end of August to come from this area.

Other Dam Issues
PacifiCorp and the Yakama Indian Nation have signed a preliminary agreement to file a joint competing license application with FERC for the Priest Rapids hydro project, now operated by Grant County PUD. Representatives of the utility and the tribe indicate their goal is to more broadly share the benefits of the two-dam, 1900-MW project with the region. Grant County PUD, which holds the existing license, now uses about 37 percent of the output; the rest is under contract to 12 public and private utilities, with the region's four IOUs receiving the most. 

This is an example of the growing influence of tribal nations on water issues in the Pacific Northwest.  While it is unlikely (to say the least) that tribal nations will take control of BPA-operated dams, they will increasingly become energy players in this region.

Forest Fires

The Chelan blaze has been controlled and there are no major forest fires, which warrant disruption of electrical transmissions.