Benefits of Alcoa power plant disputed

State official leery of shared-cost plan

June 28, 2006|By ALLISON CONNOLLY | ALLISON CONNOLLY,SUN REPORTER

FREDERICK -- A state official cast doubt yesterday on a proposal by Alcoa Eastalco Works to share the cost of building a 600-megawatt power plant to generate affordable electricity and revive its Frederick County aluminum smelting plant.

The company, which shut down most of the plant in December after failing to reach a deal with Allegheny Energy Inc. on electricity rates, is pitching a public-private partnership to build a natural gas-powered plant at a cost of about $1 billion. It appears to be a last-ditch effort to keep the aluminum plant open, after a private company shelved plans to build a power plant on the property.

The plant still produces a limited amount of aluminum sheet, with only about 50 of the plant's former work force of 639 remaining.

Company and union officials and state Del. Galen R. Clagett held a news conference yesterday at the plant's administrative offices to tout their plan and pressure the state to move on it.

They said the state could build the power plant anywhere it chooses, including Baltimore, as long as the Eastalco plant got about half the power produced.

Clagett, a Democrat, said a new power plant would foster the competition promised by supporters of electric deregulation but has yet to materialize.

The brouhaha surrounding Baltimore Gas and Electric Co.'s and other utilities' announced double-digit rate increases only underscores the need, he said, calling on the state to get its "rear hindquarters in gear."

"Right now, I'm very disappointed in the foot-dragging," Clagett said. "We need to move more quickly on this."

But while it's a good idea in theory, the plant probably wouldn't put much of a dent in the average electricity bill, said Chris Foster, the state's deputy secretary of business and economic development.

"From the state's perspective, we have to be realistic about it," Foster said. "We admire them for trying."

The company is in the midst of conducting a feasibility study, and the state is still discussing the proposal, Foster said.

It's an issue many manufacturing companies are facing as the cost of energy - whether it be powered by natural gas, coal or oil - soars.

About a third of the Eastalco plant's costs are for electricity, and company officials said they could not afford to operate at full capacity with a rate increase of more than 80 percent from Allegheny.

Catoctin Power LLC, a subsidiary of San Diego-based Sempra Energy, applied to the state Public Service Commission in February 2004 for permission to build a 600-megawatt plant on Eastalco's property for $300 million. But the project has gone nowhere since it received state approval in April 2005, according to the PSC's Web site.

"It really hurts me as a county resident to drive by this plant and see it almost nonexistent," said Stanley Biggus, the international staff representative for the United Steelworkers union, which represents Eastalco hourly workers.

It is not unusual for companies in other parts of the country to build their own power plants, Foster said.

But the situation could become complicated. For example, Eastalco could decide that smelting aluminum is too expensive and just resell the electricity, Foster said, which would not generate jobs for the local economy.

And even if the state built a power plant, Foster said, it would have little effect on consumer rates because the supply would be routed through the PJM Interconnection, the regional grid that manages the electricity supply for Maryland and other states.

He said the state recently conducted a feasibility study of a plant twice the size that Eastalco is proposing and it didn't produce the return on investment the state was looking for.

"It's bigger than BGE," Foster said. "It's a statewide issue."

His office is trying to encourage companies to build power plants, but he said they lack incentive because the cost of natural gas has risen 300 percent since 2000.

If the state doesn't help build the power plant, maintenance worker Robert Clemson of Myersville says, he fears Alcoa will close Eastalco altogether this fall when the union contract expires.

"They could play hardball," he said.

allison.connolly@baltsun.com

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