Power costs drive Eastalco to the brink

October 02, 2005|By BOB MAGINNIS

When the Maryland General Assembly passed electricity deregulation in 1999, the intent was to give consumers and businesses the opportunity to shop for cheaper power.

But when the cap on business rates expired in January, there was no cheaper electricity to be found and many local companies saw power bills soar by 30 percent or more. For one local industry that employs about 200 Washington County residents, higher power prices could put them of business.

The company is Eastalco, a division of Alcoa Primary Metals that employs 630 at an aluminum-smelting plant in Buckeystown in Frederick County. If no solution is found, officials of the United Steelworkers of America said Eastalco could send out Worker Adjustment and Retraining Notification (WARN) notices as early as Oct. 15.

The WARN act, passed in 1988, provides workers, their representatives and local government officials 60 days' notice whenever a company plans to close or lay off massive numbers of workers.


Union officials aren't exaggerating the seriousness of the problem, according to Earl H. Robbins Jr., manager of North American Public Strategy for Alcoa.

Barring some change, Robbins said, the power Eastalco buys that now costs approximately $87 million per year will go to $160 million.

"In the smelting process, one-third of our costs is in the electricity. And the way the power market has changed, Allegheny (Energy) will only sell us power at market rates. At those rates, we won't be able to afford it," he said.

Chip Cook, president of Local 7886 of the Steelworkers of America Amalgamated, said that his organization has met with members of Congress and Frederick County's delegation to the Maryland General Assembly in an effort to get their help.

"We've had talks to make them aware of the situation," Cook said, adding that some sort of emergency legislation might be written to help the company hang on until another answer is found.

Asked what that might involve, Cook said that "the biggest thing is a commitment by Alcoa to invest some resources, which may allow a long-term solution."

Cook said that what the union has in mind is an investment in a coal-fired generating plant that would allow the firm to generate its own affordable power.

Asked if Alcoa was seriously considering such an option, Robbins said it was.

"We have discussed many options. A coal-fired plant is one of them" he said.

But Robbins added that "it wouldn't solve our immediate problem. It would be a long-term solution. In the meantime, we have to find a way to bridge that cost."

At one time, Robbins said, there were discussions about building a power plant fired by natural gas on the site.

But given the rise in gas prices in the past few years, Robbins said, "that's not even a viable option now."

Asked about when WARN notices might be sent, Robbins said that "I know we will send them out as required by law if we don't have a solution in the next couple of weeks."

For Cook and his union colleagues, the problem is also personal.

Phil Wagner, Local 7886 Eastalco unit president, said that both he and Cook have been Eastalco employees for 30 years, during which Eastalco has provided them with a wage that averages $17 an hour and good benefits.

"It's one of the few companies to provide both pension benefits and retiree health care," Cook said.

Asked if the company might offer buyouts if WARN notices are sent out, Cook said that hadn't been discussed yet.

If and when it does, Cook said that the union would begin what is known as "effects bargaining," in which discussions include such topics as severance pay. Some workers will be eligible to retire and receive pensions right away, Cook said, while others could receive supplemental unemployment payments.

Not only would the plant's closing affect Eastalco's workers, Cook said, but it would also hurt also those businesses that supply the smelter with goods and services.

Still, Cook and fellow union officials remain hopeful.

"Long term, we may be able to get some help. Short term, we need some help to ride the storm out," he said.

In the next few months, state lawmakers who six years ago foresaw happy consumers shopping for the cheapest power just as they shopped for cheaper groceries will now have a chance to apologize for that inaccurate prediction and to try to make some changes in the law.

Will such changes come too late to save Eastalco? It's hard to say. Eastalco is facing a $73 million power increase, but finding even half that much in the state budget could be difficult and would result in an annual subsidy of more than $50,000 apiece for each of those 630 jobs.

However, there is still time to take care of average citizens, who will face "market rate" power costs in 2008, when the cap on residential rates comes off. This should be an election issue for every member of the General Assembly running in 2006.

If you would like to help lobby on behalf of Eastalco, contact Cook by e-mail at or by phone at 301-582-2899.

Bob Maginnis is editorial page editor of The Herald-Mail newspapers.

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