248 MULTIPLE PURPOSE RIVER DEVELOPMENT 



industries, it becomes necessary to explore the locus of gains 

 associated with this power. 



In order to simplify the analysis somewhat, we can confine our 

 attention to only that part of the BPA's industrial sales which goes 

 to the aluminum industry. This will cover the bulk of the sales to 

 directly served customers since the aluminum industry in the 

 Northwest has accounted for upwards of 85 per cent of the total of 

 such sales. 



Our analysis of the distribution of gains by the aluminum indus- 

 try differs somewhat from that of the cases involving industrial 

 sales by local distributors of Bonneville power. In most of the 

 commercial or industrial operations served by the local distributors, 

 the power bill represents a relatively small proportion of total costs. 

 Accordingly, changes in relative rates for power do not create large 

 new investment opportunities in the region, or particular incentives 

 for capital to flow into or out of the region. That is our reason 

 for assuming that the gains for these enterprises can be taken as the 

 difference between rates for power supplied from federal sources 

 and the next most inexpensive alternative in the same region. This 

 is not true of the aluminum industry. 



Because of the enormous quantities of electrical energy required 

 to produce aluminum,^ relatively small differentials in power rates 

 represent large differences in total mill costs at the aluminum 

 reduction level. Even small differences in regional power rates, 

 therefore, may influence the location of aluminum reduction facil- 

 ities. In the aluminum industry, however, the gains are not deter- 

 mined simply by comparing power rates from alternative sources 

 in the same region. These enterprises must compare differences in 

 total assembly, processing, and transfer costs attending production 

 in the region having lower power rates with the total costs in other 

 regions, where power may be somewhat higher but the cost of 

 complementary resources or transportation charges may bulk less. 

 In short, the gains from the less expensive power supply in the 

 Northwest will only partly increase the returns to the aluminum 

 industry. Part of the gains will accrue to complementary resources 

 used in production and in providing the increased transportation 

 services required if production is undertaken in that relatively 

 more remote region. 



*The requirement is on the order of 18,000 kilowatt-hours per ton of metallic 

 aluminum. 



