The price isn’t right

The long awaited explanation as to why the BC Utilities Commission put the brakes on a proposed deal between Alcan of Kitimat and B. C Hydro has finally been given. A 100 page report was released, which in effect stated that the BCUC felt that the pricing issue gave them cause to believe that the arrangement was not in the best interests of the province.

With the release of the document, Alcan and BC Hydro are expected to announce their plans as far as an appeal or any other machinations they may wish to pursue. It’s effectively the green light for rebuttal and possibly further actions on both the Hydro and Aluminum production fronts.

The Daily News presented the details in the Tuesday paper.


‘PRICE’ REASON FOR ALCAN DEAL FAILURE
By Leanne Ritchie
The Daily News
Tuesday, February 6, 2007
Page one

The B. C. Utilities Commission has explained why it thinks a proposed deal between Alcan and B. C. Hydro was not in the public’s best interest.

The commission released its full 100 page decision yesterday on the long-term proposal to allow Alcan to sell power from its Kemano plant to B. C. Hydro – one of the major conditions for Alcan proceeding with its $1.8 billion modernization plan for its Kitimat smelter.

In its decision, the BCUC said B. C. hydro should not have agreed with the pricing arrangement, which would have seen Alcan sell power to B. C. Hydro at $71 per megawatt hour, as well as pay the company $111-million in incentives based on the company’s plans to nearly double its smelter capacity to 400,000 tonnes of annual aluminum production.

It was a small victory for the District of Kitimat, which has been opposing the deal from the beginning, with claims that it was of no benefit to British Columbians.

Kitimat Mayor Richard Wozney said the BCUC has confirmed what he and his council have been saying since August.

“This is a bad deal for B. C. the deal creates strong incentive for Alcan to get out of Aluminum protection altogether. It was not a smelter deal at all. Regarding the deal, you saw the whole smelter announcement was just spin,” he said.

One of Kitimat’s main concerns was that Alcan could sell electricity regardless of whether the company failed to start or complete the smelter.

Kitimat has always contended that all of the power generated at the Kemano plant should be used for aluminum generation.

“We hope the provincial government will now hold Alcan to the existing agreements,” said Wozney. “Alcan should use all the power generated by our rivers to build the full-sized smelter it has committed to three times in the past.”
Hydro and Alcan submitted the deal for the commission’s consideration in late October, and initially attempted to keep details secret.

The BCUC also agreed with the submission by Kitimat that the proposal would not contribute to provincial self-sufficiency in electrical generation, “because there is no net increase in generation.” Nor will failure of the plan to go ahead mean that B. C. Hydro will not be able to fulfill its future power plans given “other existing committed or planned resources”.

Principally, the BCUC turned down the deal on pricing issues.

The agreement was harshly criticized as a sweetheart deal between Alcan and the B. C. Liberals by a wide range of interveners including; aluminum expert Richard McLaren; MLA for Skeena riding Robin Austin; the mayor and council of Kitimat, the B. C. Citizens for Public Power and the B. C. Old Age Pensioners Association. They said the price paid to Alcan was unnecessarily high for BC Hydro customers and pointed out that Alcan is leased a public water resource for aluminum smelting, not to sell back to BC Hydro at more than a 1,000 per cent profit.

Alcan and B. C. Hydro have said in recent weeks that once they have the decision in hand, they will assess the ruling and decide what to do.