BC Hydro & Alcan appeal LTEPA+ decision

BC Hydro,Alcan Seek To Appeal Regulator's Block on Power Deal
Canadian Press, 23-January-2007

Hydro urged to come up with better deal with Alcan
CBC News, 24-Jan-2007

VANCOUVER - B.C. Hydro and Alcan Inc. moved Monday to protect their right to appeal a decision by the provincial utilities commission that rejected a long-term energy purchase agreement between the electricity utility and aluminum company.

The B.C. Utilities Commission said the Alcan-B.C. Hydro deal was not in the public interest and that B.C. Hydro shouldn't have agreed to pricing provisions in it.

The regulator has not yet released its reasons, but both B.C. Hydro and Alcan said Monday they have sought leave to appeal the commission's order.

Hydro spokeswoman Elisha Moreno said a final decision on whether an actual appeal would be filed would have to wait until the commission's reasons are released, but the utility believed its contract was sound.

"We think that it is a good, firm supply of power, it helps us meet the growing demand for electricity in B.C., the price is good, it is a market-based price, so we're pretty comfortable and confident with that agreement," Moreno said.

Alcan said the regulator made a mistake in rejecting the agreement.

"Even though Alcan has not yet received the detailed BCUC reasons, the company must exercise its right of appeal before the end of the month," said Michel Jacques, president and chief executive of Alcan Primary Metal Group.

"Once Alcan has received the detailed reasons, it will examine them to better understand the commission's rationale and will refine and complete the grounds for appeal."

Approval of the agreement between the utility and Alcan was one of three conditions set by Alcan for the final go-ahead of a $2-billion upgrade to its smelter in Kitimat.

Alcan has said the decision by the regulator forced it to take another look at the plans to modernize the smelter and increase production to about 400,000 tonnes from 245,000 tonnes of aluminum.

However critics of the plan, which would also include cutting the smelter's workforce from about 1,550 to 1,000, have said the power deal was struck without competitive bidding and would see Alcan reap the same rates for its electricity as new projects, even though costs at its B.C. Kemano power plant are much lower.

The decision by the regulator followed a dispute in B.C. Supreme Court last fall in which the District of Kitimat asked the court to turn off the sale of Alcan power while the aluminum smelter cuts back its capacity.

The community argued the aluminum giant was breaking the law that allowed the smelter to generate its own power more than 50 years ago. The municipality said Alcan was given rights to use the river at exceptional water rates in an effort to support its aluminum operations, not to export bulk power.

Under that act, Alcan is only supposed to be able to sell surplus power, but Kitimat argued the company has cut production to sell lucrative power to B.C. Hydro.

The NDP is urging the B.C. government to get Alcan back to the bargaining table to get a better deal on hydro-electric power produced at the company's Kemano power plant in northwestern B.C.

The plant was built more than 50 years ago to generate electricity for the then-new aluminum smelter in nearby Kitimat.

But in recent years, the company has been cutting jobs at the smelter, while increasing the sale of electricity from Kemano.

Late last year, the B.C. Utilities Commission rejected an agreement that Alcan had signed to sell excess power to BC Hydro. The regulatory agency said the price to consumers was too high, and the deal was not in the public interest.

Alcan says it may abandon plans to build a new $1.8-billion aluminum smelter in Kitimat if the deal with BC Hydro isn't approved. But that smelter would also mean 500 fewer jobs for the small community.

Alex Christen, a spokesman for the Montreal-based company, said Alcan's future as an aluminum producer in Kitimat now depends on the deal going ahead.

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"We've been in Kitimat for more than 50 years. We'd like to stay in Kitimat. We'd like to build this $1.8-billion smelter."

Provincial NDP energy critic John Horgan says the Alcan warning is just "bluster," and that the sale to BC Hydro is a sweetheart deal that would give Alcan windfall profits.

"I think it's pretty hard for Alcan to walk away from the water licence at Kemano, and that is tied to them continuing to smelt aluminum at Kitimat."

This week, BC Hydro and Alcan both sought leave to appeal the utilities commission's decision.

But Horgan doesn't think the company is going anywhere, and says the government should restart the negotiations.

"I think it's incumbent on the province of B.C. to sit down with Alcan, a corporate citizen that has served the province very well over 50 years, BC Hydro, a public company that has served the needs of ratepayers for many many years, and the people of Kitimat, and come up with an agreement that everyone can live with."

The provincial government isn't commenting until the commission releases the reasons for that ruling.