Mayor Proposes Subsidy for Local Steel Plant
The Seattle City Council, which first got wind of Nickels' long-in-the-works proposal about three weeks ago, was scheduled to take up the legislation Friday, February 6. But objections by at least one council member, Nick Licata, pushed the discussion back until Wednesday, February 11.
Back in 2001, Birmingham--then on the verge of bankruptcy--convinced the city to give it a temporary rate cut of 30 percent, with the condition that the company would pay back the savings (about $13.5 million, including interest) over five years, starting in 2004. Birmingham went bankrupt in 2002, and Nucor bought the company's shuttered plant. For more than a year, Nucor enjoyed the lower Birmingham rate; but in 2003, just before the regular rate was supposed to kick in, Nucor asked the mayor's office to make a deal. Instead of paying $13.5 million over five years, Nucor would pay a lump sum of $9 million right away; in addition, its electric rates would be capped at $49 per megawatt-hour, considerably less than the current rate of $55 paid by other industrial users. In exchange for the rate reduction, Nucor would allow the city to interrupt its electric service when demand for electricity gets too high, or when the market rate for electricity passes a certain threshold, allowing Seattle City Light to sell that electricity on the open market. Nucor's subsidy would cost ratepayers between $2 and $5 million in 2004 alone, and many see the deal as a first step in a long-term ploy to reduce Nucor's rates permanently.
Two council members, Richard Conlin and Licata, have specific concerns about the Nucor subsidy. First, they call the deal an unprecedented giveaway that will open the floodgates for other large commercial customers to bully the city into giving them sweetheart deals of their own. And they question the value of "interruptibility," which was used to justify Birmingham's deal with the city. "[Birmingham's electricity was] never interrupted under the previous deal," Conlin notes. He believes a break of $1 or $2 a megawatt-hour "might be reasonable"--but not the $6 cut Nucor would get under the mayor's proposal.
Dave Gering, head of the Manufacturing Industrial Council, says keeping Nucor's 285 jobs is more important than quibbling over the value of interruptible power or whether Nucor should have to pay back all of Birmingham's debt. "If you support the notion of having these businesses here, this is definitely a tool the city can use to keep them," Gering says. A Nucor representative did not return a call for comment.