Now though, escalating power costs have forced manufacturers to scale back production. Many energy-intensive manufacturers have found it more profitable to simply shutdown and sell contracted electricity back onto the spot market at a handsome profit. Commodity-based industries command a strong presence in the region and are among those most affected. These industries self impose stringent cost controls to ensure profitability. Aluminum producers are one of the hardest hit in the region.
Electricity accounts for one-third of the cost of producing aluminum.
As previous power contracts expire, which were at much lower rates, producers are forced to absorb the now much higher prices. As a result, aluminum production in the region has declined significantly over the past six months. Lumber and paper mills have been impacted as well. Kaiser Aluminum and Valanco are prime examples of aluminum producers cutting output to sell their power back on the open market. Kaiser has idled all of its Northwest smelting capacity.