Council negotiates higher power rate with Nucor for '04

By Bob Young
Seattle Times staff reporter

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The Seattle City Council has forged an electricity-rate deal with Nucor Steel that calls for the company, the city's largest consumer of power, to pay slightly more than it would have under an initial agreement negotiated last month by Mayor Greg Nickels.

By getting more money from Nucor, council members aim to quell complaints that the special rate Nickels proposed to encourage the company to stay in Seattle amounted to a corporate subsidy that would be unfair to other City Light customers.

As part of the tentative deal with Nucor, council members also hope to get a written commitment from the company that it will invest several million dollars in its Delridge plant this year. That would be a sign that the steel mill intends to maintain its 285 jobs in Seattle and perhaps expand its operations here.

City Light charges the average industrial customer about $55 per megawatt hour. The mayor's deal proposed a top rate of $49 per megawatt hour this year. The company would pay a top rate of $51 for every megawatt hour under a deal hammered out Tuesday night by Nucor officials and Jean Godden, the council's energy-committee chairwoman.

The $2 difference could translate into an additional $750,000 for City Light this year, according to an estimate by a council analyst.

Nucor's proposed rates would only pertain to 2004. All parties agree that new rates would be set for all industrial, commercial and residential customers in 2005, after analysis and public process.

Godden said she would have liked the energy committee to vote on the package yesterday but wanted to run it past city lawyers first. She said she expected a majority of the full council to support the deal, based on conversations she has had with colleagues.

Richard Conlin, the council's most outspoken critic of the proposal, did not disagree with Godden's vote-counting. Still, Conlin said, he wouldn't support the deal.

"I appreciate that council members did a good job in negotiations, if you think negotiating is the right thing to do. But I'm not comfortable with giving rate subsidies and departing from rate calculations based on objective criteria," he said.
 
Councilman Nick Licata also has criticized Nickels' agreement with Nucor. But Licata has not been opposed to negotiating; he just wants a better deal for the city.

In return for a rate break, he said, Nucor should say in writing that it plans to stay in Seattle and expand.

"In other words, we should get something for our money," he said.

Godden said she thought that was a good idea.

"If we get something in return, like a commitment to invest two to three million dollars in the plant, that would be a good benefit," she said.

But it might be a sticking point, according to Nucor General Manager Doug Jellison. "That's asking us to give away the one bit of leverage we have," Jellison said.

Licata also argues that Nucor should pay City Light an additional $1 million to close out a complex arrangement the company inherited when it acquired Birmingham Steel, which used to operate the 52-acre plant before it went bankrupt in December 2002.

Under that arrangement, Birmingham Steel was to be allowed to pay its electricity bills in installments between 2004 and 2008 that would have totaled $13.3 million with interest. Instead, Nucor has proposed paying $9 million now in a lump sum. Licata believes the company should pay at least $10 million, but a majority of council members appear willing to accept the $9 million.

One Seattle business group said it had no problem with Nucor getting a special rate or subsidy. The executive board of the Manufacturing Industrial Council voted Tuesday night, by a 12-1 margin, to endorse the mayor's deal with Nucor, according to the council's executive director, Dave Gering.

Bob Young: 206-464-2174 or byoung@seattletimes.com

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