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Layoffs in store at Eastalco plant

November 24, 2005|By DANIEL J. SERNOVITZ

daniels@herald-mail.com

FREDERICK, MD. - Pittsburgh-based Alcoa intends to follow through with projected layoffs and cutbacks at its Eastalco aluminum smelter in Frederick starting Dec. 19 because it was unable to secure a more competitive, long-term electricity contract within Maryland's deregulated electricity market, the company said in a statement Wednesday.

The company, which employs more than 600 workers at the plant according to company information, expects to retain about 100 workers while it gears down and will maintain a skeleton crew of about 25 workers after the transition.

The measure will cost the company about $14 million in curtailment costs reflected in its fourth-quarter results, though the statement said the company has pledged to maintain operations at its other plants and will continue to work with local and state officials to try to secure a more competitively-priced contract beyond Dec. 31, when its current contract with Allegheny Energy expires.

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The company sent notices to its Frederick employees in October, warning that unless the company was able to find lower electricity rates it would be forced to cut back on production and lay off workers.

The company, one of the largest electricity users in Maryland, projected its electricity costs would rise by about 83 percent in January, when Allegheny Energy shifts its largest electricity users in Maryland to market-based rates.

Eastalco was among the most vocal proponents of electricity deregulation before the state's passage of its 2002 deregulation act. In an earlier interview, company spokesman Earl H. Robbins Jr. said at the time it could not have foreseen the measure would result in rate increases that would force the plant to shut down or drastically reduce production.

"We understand that the (electricity) generators need to make a profit, but we didn't think that (when the law was put into effect) it would put a company like Eastalco out of business," Robbins said. "In my opinion, this is a situation that is deeper than what's affecting Eastalco. It's affecting large power users across the U.S."

Allegheny Energy spokesman Allen Staggers could not be reached for comment. In an earlier interview, he said losing Eastalco as a customer would have a large impact on the company's business, but with deregulation, Allegheny Energy cannot offer the type of long-range contracts is previously offered large users like Eastalco.

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