http://www.canada.com/montreal/montrealgazette/news/business/story.html?id=b eb6e7d8-b701-473d-9631-1d8e131cde53 Hydro ready for new talks with Alcoa Baie Comeau smelter at risk after price war KEVIN DOUGHERTY The Gazette, January 28, 2005 Hydro-Quebec is willing to resume negotiations with Alcoa, which shelved a $1-billion modernization plan at its Baie Comeau smelter after failing to reach an agreement with the Quebec utility last year on electricity pricing. "We are going to negotiate with Alcoa," Hydro-Quebec president Andre Caille said in an interview. When talks broke off between Alcoa and Hydro-Quebec, the future of the town on the North Shore of the St. Lawrence was left in doubt. Baie Comeau was created in the 1930s because it offered cheap electricity, which drew aluminum and newsprint companies, industries that consume massive amounts of electricity. Caille said in the future, Hydro-Quebec, which sells about 10 per cent of its total production to companies smelting aluminum or magnesium, will not be interested in greenfield, or new aluminum smelters in Quebec. But it is interested in maintaining existing jobs in aluminum. "We have no plans to close aluminum smelters to recuperate energy," he said. "On the contrary, we feel we have a responsibility to regions, such as the North Shore, the Saguenay-Lac St. Jean, so that jobs are maintained, whether it is aluminum or paper." In the past, Hydro-Quebec's low production costs were used as a lure to draw aluminum smelters to the province, offering multinational companies like Alcoa sweetheart deals. "The time when Hydro-Quebec was a price taker is finished," Caille said. Pierre Despres, spokesperson for Alcoa Canada, said yesterday Alcoa is Hydro-Quebec's biggest customer, with an annual hydro bill of $400 million. "We will certainly listen," he said. The previous Parti Quebecois government reached an agreement with Alcoa before the last election, but the Liberal government did not respect that accord. During the election campaign, Jean Charest said the price offered to Alcoa was too low. Despres said the sticking point with the Liberal government's counteroffer Alcoa rejected last year was the pricing formula. Alcoa did not consider the price offered was competitive in the long run and took its $1 billion for new investments in Iceland and Trinidad. "We don't have it (the $1 billion) anymore," the Alcoa spokesperson said. In its brief to a National Assembly committee studying Quebec's energy future, Alcoa proposes building its own hydroelectric dams to meet its needs. At present, only Hydro-Quebec may build stations generating more than 50 megawatts of power. Caille also said Hydro-Quebec wants to hire bright young graduates from Quebec's business schools and plans to train them to become in-house experts on aluminum and the paper industry, so the utility will be in a better position to negotiate with multinational producers. "We want to negotiate," he said. "We want to understand what we are doing. When both sides understand, it is easy." Speaking at National Assembly hearings yesterday on the province's energy future, Conseil du patronat du Quebec vice-president Diane Bellemare argued that businesses are subsidizing the rates householders pay by as much as 131 per cent. The Conseil du patronat is the lobby group for employers. Bellemare echoed Caille's plea for the government to unfreeze the price of the utility's basic load of 165 terawatt-hours of electricity. But Rita Dionne-Marsolais, the PQ energy critic, noted that Universite du Quebec a Montreal economist Pierre Fortin told the committee that householders subsidize industrial users. Fortin said industrial users consume 43 per cent of electricity, but pay 32 per cent of the total bill. kdougherty@thegazette.canwest.com
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