The Paducah Sun
The Paducah Sun

   Saturday, May 06, 2000   Paducah, Kentucky

USEC plant vote expected

By Joe Walker jwalker@paducahsun.com--270.575.8650

A lawyer for the atomic workers' union says he expects USEC Inc. directors to vote conditionally at their next meeting to close one of two uranium enrichment plants amid the company's predicted 60 percent earnings drop during the next year.

"I don't think it will be a complete decision, but I think the board will come out with a contingent decision," said Richard Miller, Washington-based policy analyst for the union.

He said he doesn't know which plant is the more likely candidate for closure. USEC runs plants near Paducah and Portsmouth, Ohio.

Miller said the decision hinges on at least three issues: an ill-fated uranium agreement between USEC and Russia; a plan to upgrade Paducah's enrichment level; and power contracts that account for about 57 percent of production costs.

USEC spokeswoman Elizabeth Stuckle declined to say when the next scheduled board meeting will be, but said directors will discuss plant closure among many cost-cutting considerations. Various Washington sources indicated the meeting would be in June.

"The closing of a plant has been under consideration for some time," Stuckle said. "The economics have shown that eventually a plant closure is inevitable. USEC has not made a decision about closing a plant, which plant, or when."

The company said it will cut 625 plant jobs, including 271 at Paducah, starting July 14. USEC originally said it was eliminating 850 jobs, but Department of Energy officials said the reduction to 625 was because of attrition and more project work by USEC employees for DOE.

The number of reductions in Paducah was orignially listed at 425 and was redud to 275 on Thursday. On Friday, it was revised down to 271.

It includes 165 salaried workers, 102 members of the Paper, Allied-Industrial, Chemcial and Energy Workers Union (PACE) and four members of the United Plant Guard Workers of America.

The classification breakdown of PACE workers includes 20 electrical mechanics, four firefighter-EMTs, 10 instrument mechanics, three laborers, 30 maintenance mechanics, four material handlers, 18 operators, 12 B operators and one sheet metal worker.

"As DOE work increases and decreases, the number of our employees doing that work will fluctuate," Stuckle said.

"For those of us who have looked at (USEC's) economics and what the board is grappling with, it's a little hard to conclude this is the end of the layoffs," Miller said.

Miller said it is his understanding that Gary Ellsworth, USEC vice president of government affairs, told some federal lawmakers from Kentucky and Ohio that the board will discuss plant closure at its next meeting. Stuckle said briefings with legislative offices about upcoming board matters are routine.

John Driskill, president of the Paducah plant guards' union, said USEC managers told him in March that the job cuts would not affect the 36 security personnel Driskill represents. But this week he learned that four or five guards' jobs would end, plus several more in related services such as emergency response and security classification.

"They came up with the numbers strictly based on dollars and haven't looked at the impact of losing a significant number of service personnel," Driskill said. "It exacerbates the public safety risk and can cost lives immediately if something happens."

He said he is unsure how the Nuclear Regulatory Commission can continue certifying the plants if the job cuts make safety questionable.

Last month, a Bank of New York Capital Markets analyst said he expects USEC to announce in late summer that it will close a plant by July 1, 2001. Richard Rossi, who wrote a report analyzing USEC's $500 million bonded debt, said the closure will save $65 million a year in power and labor costs.

Rossi said "a very clear sign" of which plant will close will be that the survivor gets a long-term power contract. Each plant uses enough power to run a major city.

Stuckle has repeatedly said USEC is aggressively negotiating power contracts. A key for Paducah is stabilizing electricity prices year-round, Miller said, pointing to huge spikes in costs during the past two summers that forced Paducah to idle production.

Although Paducah is considered more efficient than Portsmouth, it cannot enrich uranium independently of its sister plant. USEC has sought NRC approval by Dec. 31 allowing Paducah to enrich uranium to fuel-grade assay, which would make it independent, but the commission says approval could be a year away.

Last month, the NRC sent a letter responding to the USEC request.

"We basically told them the schedule you've laid out is not going to be met by Dec. 31," said Melanie Galloway, chief of NRC's enforcement section. "The material must be complete and high quality, and if it meets approval, the earliest is March 1, 2001."

Galloway said increasing Paducah's enrichment capability is serious, complex and probably will require significant exchange between NRC and USEC.

"That, by its nature, adds time to the schedule," she said. "If that's the case and we do have a lot of questions, and the answers are complex, we're looking past March 1."

The Russian matter is even more complex.

Over the next 20 years, USEC is buying about $8 billion in uranium from Russia in a nuclear disarmament pact backed by the federal government. The material roughly equals one plant's production, meaning USEC needs to run each plant at only 25 percent capacity, Rossi's report said.

USEC is paying Russia, a competitor, more per unit of enriched uranium than the cost for which Paducah and Portsmouth can enrich it. The flood of uranium will increase USEC's production costs from $93 per unit this year to more than $110 next year, compared with the spot market price of about $80, the report said.

The report predicted USEC would reach a new contract in 30 to 90 days to buy Russian uranium for less than $80, partly because Russia badly needs the deal to prop up its economy. Last week, USEC President and Chief Executive Officer William "Nick" Timbers said he expects to reach an agreement later this year to ease the prices paid for Russian uranium, but that would not take effect until January 2002.