Alcoa's Yadkin project could be affected by talk of public agency for water power

Published 12:00 am Friday, March 2, 2012

By Emery P. Dalesio
AP Business Writer
RALEIGH – State and civic leaders waging a yearslong fight over the hydroelectricity produced by North Carolina’s Yadkin River say a public power agency could attract jobs to the region rather than channel profits to current operator Alcoa Inc.
They point to the success of similar public agencies in South Carolina and New York.
But getting the cheap, clean energy to attract thousands of jobs would require a never-before act of Congress to give an operating license for the dams to a North Carolina entity that doesn’t yet exist.
Still, leaders who favor fighting for the hydropower license Alcoa has held for decades and wants to lock up for another half-century are beginning to talk up a public power agency as an alternative.
The idea of creating a public entity to operate dams that have been in private hands since the early 20th century conjures “an image of big, bad state government taking over,” said state Commerce Secretary Keith Crisco, Gov. Beverly Perdue’s top business booster. So a power agency could be centered in the six counties nearest the dams and their reservoirs instead of Raleigh. But look to the example of South Carolina, which if anything is even more politically conservative, he said.
The state-owned electric and water utility, Santee Cooper, announced this month that it would cut its power rates by up to 20 percent to attract new companies or encourage existing ones to expand. With the state’s electric cooperatives passing along the discount, the offer extends statewide, including South Carolina’s rural pockets.
But Alcoa is committed to extending its right to operate the four dams on the Yadkin, which flows into South Carolina as the Pee Dee River.
Company figures estimate that the dams could generate revenues of more than $2 billion over 50 years, the period for which Alcoa seeks a new license. Those revenues could multiply if demand for clean power booms or the dams increase their output.
The contest for who will control a key water source for one of the country’s fastest growing states and what the electricity would be used for is likely to continue for years.
If the Federal Energy Regulatory Commission decides against renewing Alcoa’s hydroelectric operating license, the regulators could recommend to Congress that a state or municipal body run the dams instead. But that has never happened.
The idea of a public power agency offering cheap hydroelectricity for jobs in a region where the unemployment rate is worse than the statewide average has been around at least since Perdue, a Democrat, took office in 2009.
Legislation to create an entity that might someday receive the hydro license failed in 2009, when Democrats still controlled the General Assembly. Lawmakers later created a regional economic development commission with fewer powers, but which could still own or lease property.
Some of the Republicans who took over the legislature last year were among the strongest opponents to creating a public power authority that could take the place of a private company.
Pat McCrory, the Republican who lost the 2008 gubernatorial contest to Perdue, urged the FERC weeks before election day to consider why Alcoa should get a new Yadkin license when the smelter jobs were gone and the state was coping with a historic drought. McCrory is running for governor again this year, but his campaign did not explain his current position on Alcoa’s relicensing. Perdue opted out of seeking re-election.
State officials are taking the New York Power Authority as a model of a low-cost electricity alternative to Alcoa. The NYPA’s Power for Jobs program takes credit for helping creating or preserving 239,000 jobs in more than a decade to 2009.
Officials looked at what economic development efforts NYPA had made with the private sector to get a better idea of what North Carolina could be doing, a Commerce Department economist explained in one of hundreds of agency emails provided to The Associated Press under a Freedom of Information Act request.
Alcoa is one of the hundreds of companies that decided the NYPA’s low-cost power made a good business case for keeping jobs in New York. In the worst of the recession, Alcoa agreed in March 2009 that it wouldn’t eliminate about 1,100 jobs at its two smelters in upstate New York and would instead modernize and expand the site.
The New York example was in the background last year, when Alcoa offered a jobs-for-license deal. The country’s largest aluminum company backed a start-up steel company promising hundreds of jobs at the old smelter site — but only if state and local officials backed off and allowed the company to get its federal license.
Crisco said it amounted to a bad deal compared to the thousands of jobs that could result if a mini version of the NYPA was created for the Yadkin. The state didn’t budge and the start-up gave up.
Alcoa believes the example of New York’s public power agency isn’t applicable to North Carolina, vice president Kevin Anton said.
The NYPA’s dams produce far more electricity than those on the Yadkin, so it has more to offer more companies, Anton said. The New York power plants also were built and paid for by that state, so North Carolina’s efforts amount to government trying to take private property, he said.
“The reality is that the Yadkin Project is much too small in terms of energy production to serve as an economic development tool capable of creating tens of thousands of new jobs,” Anton said.
If North Carolina or another operator were to take over the Yadkin dams from Alcoa, the company would be compensated, though the competing sides differ widely on the cost.
Meanwhile, a sustainable economic development nonprofit opposed to Alcoa’s relicensing efforts is launching an online campaign in the coming weeks to position a public-power entity as an alternative to Alcoa as dam operator. Central Park NC also is funding a study of the feasibility of operating the Yadkin’s hydropower dams to recruit jobs. The group is soliciting bids from the state’s research universities to conduct the study, which should be completed by fall.
“There’s really never been any comprehensive look at the value of the Yadkin River. We really don’t know what the damn thing’s worth,” said Nancy Gottovi, Central Park NC’s executive director. “Out West, where water is a big deal, we’d know what the value is. We decided it was high time to do this study.”