Industry financially squeezed by high electricity prices

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EDMONTON - You can hear it on the floor of AltaSteel's east Edmonton mill when the hourly price of electricity spikes. Virtually everything goes quiet.

For almost two full days this week, there was no jet engine-like roar from the massive furnace, no crackle of melting scrap metal and no sirens indicating that red hot liquid steel was about to pour into the ladle below.

"We turn off when the price per kilowatt hour hits a certain threshold," AltaSteel president David Knights said Thursday. "At a certain value, it becomes uneconomic for us to operate the steelmaking facilities."

Electricity use in Alberta is on many people's minds. Earlier this week, the Alberta Electric System Operator, which oversees the operation of the electricity grid, reported two records for energy consumption. Hearings also are taking place in Edmonton about the future of a controversial power transmission line proposal.

For some big electricity users, however, dramatic hourly price fluctuations due to consumer demand, extreme cold and a number of forced outages at power generators in the province, are a concern.

The highest possible price per megawatt hour in Alberta is $999.99, said AESO spokeswoman Dawn Delaney. "We have hit that this week."

Industrial and commercial users account for nearly 85 per cent of demand for electricity in the province. For industrial electricity consumers who aren't on a fixed-rate contract in this deregulated electricity market, those hourly price fluctuations are serious business.

While residential electricity bills are calculated based on a monthly rate, industrial users are metered and billed hourly.

That is why companies such as AltaSteel and Whitecourt's Alberta Newsprint Company keep a close watch on those fluctuating prices. Like AltaSteel, Alberta Newsprint Company's mill is typically a 24-hour-a-day operation. Electricity accounts for 40 per cent of its costs.

"The very first thing you see when you go into our mill is this screen where you see the power prices," Alberta Newsprint's director of energy Surendra Singh said.

On both Monday and Tuesday, those electricity prices prompted the newspaper mill's shutdown from 6 a.m. to 9 p.m. The decision, Singh said, was obvious. "At that price, it is completely uneconomical to run our mill. We lose money to produce paper at that price."

AltaSteel employs about 400 workers. Alberta Newsprint has 190 employees. In both cases, the workers remain on-site and are paid to tend to other duties as they wait for prices to dip low enough to restart the plants.

AltaSteel was back in production Thursday morning, but staff kept an eye on AESO's website, which tracks electricity use across the province and prices.

Paul Perreault, an AltaSteel employee and president of the Local 5220 of United Steelworkers of America, which represents most AltaSteel's workers, said the spikes in electricity prices concern workers worried about the effect on the mill's future

Alberta Federation of Labour president Gil McGowan want the province to again regulate electricity prices. It would help people with their power bills at home and help keep jobs here, he said. "If you can keep power prices lower, that's a competitive advantage. It's a consumer issue, but it's also a business issue."

NDP Leader Brian Mason also called on the province this week to end deregulation. Alberta Energy spokesman Bart Johnson said Thursday there are no plans for that to happen.

"Most industries in the province do not buy their power in real time," Johnson said. "Most have contracts and therefore aren't affected by the sudden spikes, whether they be up or down. Any industry or company that doesn't like the spikes can buy into a contract like other companies do."

This week's shutdowns were not the first for AltaSteel. Knights said the plant does loses some hours each month because of high electricity prices, typically in the afternoon when people get home. "This is the longest period we've been down," he said of this week.

For OneSteel, AltaSteel's Australian parent company, electricity prices here are at the high end compared to its four facilities in Australia. "Steel is a low-margin business. It's a competitive business. There's oversupply in the steel industry," Knights said. "The power prices are putting us at a competitive disadvantage to our competition overseas and across the border."

A fixed-price contract is not an option for AltaSteel because those prices are "prohibitive," he said, urging the province to review its deregulated model.

Alberta Newsprint Company's Singh said his company is concerned about too little generating capacity in the province. In the meantime, it is working to be more energy efficient and is proposing to build its own on-site power plant.

"This kind of prices, we can't afford them and we can't have our plant going up and down the way we have right now," Singh said.

Edmonton Journal, Thurs Jan 19 2012
Byline: Sarah O'Donnell

Add CommentComments (1)

By Janey | April 23, 2012
I have a hard time paying for the electricity in my own apartment let alone worrying about an entire industry. How does a contract work between a business and an Alberta electricity company? I can't say that I blame some of the larger businesses for turning off the electricity when it goes beyond their budget. That would be hard to deal with especially when you consider how much we use electricity today.

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