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As Long as We Remember...

June 20, 2005

Eastalco, a Campfire Nightmare

Richard B. Weldon Jr.

Okay, campers! Grab a marshmallow, two graham crackers, and a piece of chocolate. Over here is a pile of green twigs, with the ends whittled down to a dull point.

Poke a marshmallow on your twig, jockey for a spot around the campfire, and get that marshmallow good and hot (don't set it on fire, though).

While we melt our little fluffy white sugar pillows, let me tell you a spooky story about Eastalco, a big aluminum plant right here in our neighborhood.

When I say neighborhood, I mean a BIG neighborhood. Eastalco sits on 400 acres of a 2,200-acre tract of land. The rest of the land is rented out to local farmers.

See, Eastalco is also a place where a lot of people work, 639 people to be exact. Not just those people, but also many of their fathers worked there, too. These 639 people are not just everyday laborers, either.

They have specialized skills, and can't just pack up and go to work somewhere else. You see, these people make aluminum, and you just can't do that anywhere.

Eastalco has a direct annual payroll over $35 million dollars. In addition to payroll, the company pays approximately $16 million in annual fringe benefits.

You need a big plant, one that takes up a few square miles. You need storage space, large buildings for the smelting and casting operations, and you need lots and lots of electricity.

You see electricity is the most essential (and most expensive) raw material in the aluminum manufacturing process. At Eastalco, they run high voltage current directly through alumina ore in the smelting process. Electrical power makes up 25% of the cost to produce aluminum.

The power comes from Allegheny Energy, the same people who sell our electricity to us. The difference between us and Eastalco is that they are Allegheny's single largest customer.

Allegheny has recently notified Eastalco that the current long-term contract will be terminated. The new contract rate will be 80% higher than the current rate. Imagine what an 80% increase in your utility cost would do to you.

Logical campers might ask how this happened. Eastalco says it is a result of de-regulation and increasing fuel prices, Allegheny says they have been selling electricity to Eastalco well below market rates (as much as $70 million below market), and cannot continue the practice under utility de-regulation.

Allegheny says that they cannot continue to underwrite the loss in revenue, and that Eastalco can choose another energy supplier. I guess that means there are other power companies lining up to offer below cost power, but I don't think so.

Now for the spooky part: if Eastalco cannot continue to purchase electricity at a discount, it is possible (maybe probable) that Alcoa, Eastalco's parent company, will move the production capacity out of Adamstown. Alcoa has plants in Canada and Iceland, powered by co-located hydroelectric plants that can produce aluminum cheaper than Eastalco.

That would mean that 639 people would be out-of-work, possessing skills that cannot be easily transported to other work environments. That means that 2,200 acres of land would be on the market, a good portion of which is zoned for industrial use.

That means the Carroll Manor Fire Company, Carroll Manor Elementary, various youth sports teams, and other non-profits causes would lose their most dependable benefactor.

So this seems like the ultimate no-brainer, huh? Not so fast, campers. If the State of Maryland's Public Service Commission (PSC) were to directly intervene and order Allegheny to offer a below-market rate to Eastalco, guess where Allegheny would look to make up the difference?

Your electric bill is the simple answer. Are rate-payers around the county and region willing to bear the burden of an offset to justify a rate reduction to Eastalco?

So far, the Frederick County Commissioners have asked the PSC to please consider the impact on our county if Eastalco cannot buy cheaper power. I expect the Washington County Commissioners to do the same. The Frederick County legislative delegation has a meeting planned with Eastalco soon, and Eastalco officials will also make a direct appeal to the PSC very soon.

Only time will tell whether this story has a happy ending or ends in a bloody massacre affecting 639 hard-working Marylanders.

By the way, I think you burned your marshmallow.

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