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June 20, 2008
Alcoa officials said Thursday that they would temporarily lay off 250 employees at the company's Rockdale aluminum smelter and might be forced to close the plant because of an unreliable power supply.
The company will indefinitely shutter three of the smelter's six potlines -- cells used in aluminum production -- said company spokesman Kevin Lowery. The potlines represent about 120,000 metric tons per year of production, according to a company release.
"When you operate an aluminum smelter, you need electricity," Lowery said. "In fact, you need three things: long-term, reliable and competitively priced power."
Officials from Luminant, the power company under contract to supply electricity to the plant, said Alcoa's service interruptions began in early May when the company took its Sandow 4 unit off-line for maintenance.
Tom Kleckner, a Luminant spokesman, said the unit has since had several outages due to a boiler tube leak that the company is working to repair. The company is also building another power unit, Sandow 5, which will go operational in early 2009, Kleckner said.
The Rockdale smelter is one of eight Alcoa operates in the U.S. The facility's estimated 900 employees produce the raw aluminum commodity that Alcoa sends to fabricators and customers around the world.
Approximately 750 Alcoa employees belong to United Steelworkers Local 4895, according to union Vice President Troy Hirt. The remaining employees are primarily contract labor, he said.
Under Alcoa's agreement with the union, the aluminum producer must pay supplemental unemployment benefits to all permanent workers who have been at the smelter longer than two years. The duration of those benefits depends on an employee's length of employment, Hirt said.
"But we're hoping it doesn't get that far," Hirt said. "They started taking the lines down today, but they're not going to lay anyone off for 60 days."
Alcoa's Lowery said the power interruptions at the Rockdale smelter forced the company to buy energy on the regular market during peak consumption.
"Our energy costs have spiked to as much as $2,000 to $4,000 per kilowatt hour," he said. "Unfortunately, it's just not economically feasible to run the plant that way."
Luminant officials disputed Alcoa's explanation for the layoffs, saying in a written response that they were not to blame.
"Simply put, it appears Alcoa does not like the power prices that the Texas market has produced in some limited instances this year, and instead apparently wants to pay below-market prices and prices lower than provided in the contract Alcoa negotiated with Luminant," according to Luminant.
Hirt said the plant had been paying an average of $40 per megawatt hour.
Lowery said that if the power issue wasn't resolved, Alcoa might be forced to close the plant. According to a written release, Alcoa will use "contracted, long-term power" to operate the remaining potlines.
Alcoa's spokesman said the company was in talks with Luminant throughout the day Thursday, prior to announcing the temporarily potline closure.
Luminant's statement said supply interruptions from the Sandow 4 unit had not resulted in unfair power prices for Alcoa. And a provision in Alcoa's contract serves to limit the company's costs of buying power from other suppliers when Sandow 4 is not producing power, the company said.
"Luminant has also offered Alcoa several other options for buying power during those times, but Alcoa has declined to pursue those offers," Luminant said.
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