Aluminum canning

October 14, 2005

MORE THAN 600 EMPLOYEES AT the Eastalco aluminum smelting plant in Frederick County were given layoff notices yesterday. The plant's owner, Alcoa Inc., says it would like to keep the facility open but can't -- unless the company can find a less-expensive source of electricity. But finding that solution is already generating at least one bad idea from local politicians.

The shutdown comes as no surprise. Making aluminum requires a lot of electricity. Currently, Eastalco gets its power from Pennsylvania-based Allegheny Energy, but the discount contract is set to expire at the end of the year. After that, Alcoa would face market rates, and company officials say they can't make a profit at those prices.

The closing would be no small loss for the region. The plant has a total payroll of more than $50 million including worker benefits. And Eastalco provides the kinds of blue-collar jobs that are particularly difficult to replace. That's left officials at the Maryland Department of Business and Economic Development scrambling to find a way to keep the smelter open after December.

Legislation drafted by some local lawmakers would force Allegheny to sell electricity to the plant at current rates for the next two years. In theory, this would give Alcoa the time to purchase or build its own power plant. But the plan is shortsighted. The whole point of deregulation is to let the market set utility rates. How can the state justify penalizing Allegheny now?

There's also a matter of fairness. Allegheny isn't the only utility that could supply Eastalco, and any rate freeze would likely shift costs to the utility's other customers. And Allegheny is having financial struggles of its own -- it nearly went bankrupt in 2002.

State officials believe the only viable long-term solution is for Alcoa to purchase an existing coal-fired power plant to generate electricity for Eastalco. DBED Deputy Secretary Christopher Foster said his agency is willing to assist Alcoa if a short-term bridge is needed, but believes it's up to the company to commit to a long-term strategy first.

That's a sensible position. While we regret the loss of jobs, the worst thing the state could do would be to spend tens of millions of taxpayer -- or utility customer -- dollars to underwrite Eastalco if it only delays the inevitable.

The company recently purchased plants in Russia. Might it be shifting more of its production overseas where utility rates are lower? Such are the unavoidable facts of life in a global economy -- even when it hurts so many in Maryland.

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