New Long-Term Power Supply
Contract With Alcoa Approved By N.Y. Power Authority Trustees
December 16, 2008
FOR IMMEDIATE RELEASE
UTICA—New York Power Authority (NYPA) President and
Chief Executive Officer Richard M. Kessel today announced that the
process for securing the long-term future of Alcoa’s operations in
Massena took a major step forward with the approval by the NYPA
Trustees of a new power supply contract. This new contract commits
the aluminum company to maintain a minimum of 900 jobs over the
30-year contract and invest at least $600 million to rebuild its
Massena East smelter.
The new contract, which is subject to the approval
of Governor Paterson, is to commence on July 1, 2013 and will
provide that Alcoa will continue to receive its current allocation
of 478 megawatts (mw) of hydropower (374 mw of firm power and 104 mw
of interruptible power), accounting for approximately 60 percent of
the St. Lawrence-FDR project’s generating output.
“With today’s action, the Power Authority has made
a major contribution ensuring the continued viability of Alcoa’s
Massena East and West smelting operations for decades to come,” said
NYPA Acting Chairman Michael J. Townsend. “We’ve been working
diligently toward this day for sometime now as part of a
deliberative process for maximizing the value of the low-cost
hydropower from our St. Lawrence-Franklin D. Roosevelt Power Project
for the North Country’s economy. We’re recommending that Governor
Paterson approve the new long-term power supply contract, in support
of the retention of hundreds of jobs at Alcoa and of the company’s
significant investment in the upgrade of the East facility.”
“The NYPA Trustees’ approval of the new contract is
another milestone in the process for making certain that Alcoa
continues to be an anchor for the North Country’s economy for many
years,” said Kessel. “Alcoa’s importance to the region and New York
State is indisputable, including good, family-supporting jobs,
commerce with other businesses in the state, and essential tax
“The Power Authority and Alcoa’s partnership has
been beneficial for both parties for more than a half a century, and
for Northern New York and New York State,” said Judge Eugene L.
Nicandri of Massena, who became a trustee of the Power Authority in
September. “I’m delighted that the mutually beneficial relationship
with Alcoa will continue for years to come and serve as the
cornerstone for a bright economic future for Northern New York.”
“Today’s action by the NYPA Trustees keeps us on
track toward obtaining approval from the Alcoa Board of Directors of
the major renovation of the East Plant,” said Bernt Reitan, Alcoa
executive vice president and group president, Global Primary
Products. “The upgrade will solidify Alcoa’s long-term future in
Northern New York, so the certainty of the low-cost hydropower for
our energy-intensive business could not be more important.
This is particularly crucial in light of weakening worldwide demand
for aluminum from the downturn in the economy, and lower commodity
Alcoa, which is New York State’s largest
private-sector employer north of Syracuse, acquired the East Plant
in 2000 from its merger with Reynolds Metals. In addition to
modernizing the plant and maintaining at least 900 jobs at the two
Massena smelters, Alcoa will establish a $10 million North Country
Economic Development Fund (NCEDF) within 90 days of its board of
directors approving the rebuilding of the facility.
The NCEDF, which would be jointly administered by
NYPA and another entity specified by New York State, will be used
exclusively for creating jobs and capital investments in St.
Lawrence, Franklin, Essex, Jefferson, Lewis, Hamilton and Herkimer
counties and on the Akwesasne Mohawk Reservation.
The NYPA trustee approval follows a November public
hearing in Massena on the new contract, whose terms are essentially
identical to those in an Agreement in Principle signed one year ago
by NYPA and Alcoa officials after lengthy negotiations.
Those speaking at the Nov. 6 hearing, or submitting
written comments, stressed the importance of the low-cost hydropower
allocation, with electricity typically amounting to about 30 percent
of the production costs of smelting aluminum.
Said Kenneth J. Pokalsky, senior director,
Government Affairs of The Business Council of New York State, “We
believe that the proposed contract contains reasonable commitments
for both Alcoa and NYPA, in terms of long-term pricing and power
delivery, and in terms of conditioning contract benefits on the
company’s achievement of investment and employment targets.”
Kessel noted that this is the first time that
formal job commitments, similar to arrangements NYPA has with other
businesses in the state for various power programs, are part of the
contract with Alcoa, which became the Power Authority’s first power
customer in 1955 with the signing of its original contract.
Another important feature of the new contract is
that it links the rates Alcoa pays for the low-cost power with
global aluminum prices. In this manner, NYPA and Alcoa will each
benefit from stronger markets and the company will have some
protection against downturns such as in the current economic
The new contract has an option under certain
circumstances for an additional 10-year extension beyond 2043 when
the base contract period expires. The contract will replace existing
power supply contracts that NYPA completed with Alcoa and Reynolds
Metals in August 1981 that expire in June 2013.
The approved contract will now be transmitted to
Governor Paterson, who will have sixty days to review and act on it.
The power that Alcoa receives from St. Lawrence-FDR
comprises most of a block of industrial power from the project under
the Preservation Power Program, which is reserved for North Country
businesses under a 2005 state law.
■ NYPA uses no tax money or
state credit. It finances its operations through the sale of
bonds and revenues earned in large part through sales of
electricity. ■ NYPA is a leader in promoting
energy-efficiency, new energy technologies and electric
transportation initiatives. ■ It is the
nation’s largest state-owned electric utility, with 18 generating
facilities in various parts of the state and more than 1,400
circuit-miles of transmission lines.
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