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Energy costs main factor in closure of division at Butte company

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Energy costs main factor in closure of division at Butte company

Apr 02, 2024 | 7:46 pm ET
By Keila Szpaller
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Energy costs main factor in closure of division at Butte company
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Photo illustration by Getty Images.

High energy costs are forcing a company in Butte to phase out a division of its business, and a vice president said this week a minimal number of employees — paid more than $100,000 on average — could be affected but did not have a precise count.

Earlier this year, REC Silicon announced it would shutter its polysilicon production in Butte because of the rising cost of electricity in the region. It buys energy on the open market.

The company produces materials for the solar and electronics industries worldwide.

“Energy costs are a huge concern right now in the state of Montana,” said DeeAnna Worley, vice president of the Butte operation for REC Silicon.

The silicon gas side of its business remains a “key resource” for customers globally and is set to expand, according to a 2023 annual report. Worley described it as “thriving.”

Pat Barkey, head of the University of Montana Bureau of Business and Economic Research, said although Montana historically has been a low-cost state for energy in the region, costs are nonetheless going up, and the market has tightened.

Anne Hedges, with the Montana Environmental Information Center, said companies that buy on the open market don’t have good options in Montana.

She said REC Silicon can buy from NorthWestern Energy, which is regulated, or from the open market, which, due to transmission constraints, generally means buying Colstrip power from Talen Energy.

“The problem is the Public Service Commission has allowed NorthWestern to jack up our rates to be the highest in the region,” Hedges said. “And the power that’s sitting on the market? A lot of it is coal-fired, and Colstrip is one of the most expensive resources available today.

“So they don’t really have very good choices.”

The Public Service Commission regulates monopoly utilities in Montana. It is made up of five elected commissioners, currently all Republicans.

Worley said REC Silicon employs 230 to 235 people, and “a handful” employees will be affected by the phaseout, although she did not have a precise figure Tuesday.

The jobs pay on average $101,084, nearly twice the annual household income of $56,522 in Butte in 2022, according to the company and the U.S. Census.

However, Worley said the company is managing losses and reducing impacts on staff by taking advantage of retirements and posting some open positions only for internal candidates.

“Those who have other opportunities have taken them, and we’re keeping as much staff as possible because we do have commitments to get product out the door,” Worley said.

The company has headquarters in Norway, and in the U.S., it also operates in Moses Lake, Washington.

The polysilicon side of the business is energy-intensive. REC Silicon said in a February news release the decision to shut down the division in Butte in the next six to nine months is due to the “regional structural imbalance in supply and demand for electricity” and one that will help ensure profitability.

Worley said REC Silicon has met with politicians and private parties, and wheels are in motion to resolve “what I would consider a very off-balance power market.”

“Something will need to be done in order for power to be a viable resource in the state of Montana at a reasonable price,” Worley said. “ … Nobody is regulating what I pay for power.”

She said industry professionals make projections based on what is happening in the natural environment and effects on things like hydropower, which is typically more affordable. But it isn’t easy.

“How much snow will we be getting?” she said. “How many forest fires? What happens to power lines? It’s a crapshoot, really.”

Barkey, director of the Bureau of Business and Economic Research, said anyone who wants to make commodity projections should “prepare to eat humble pie,” and electricity is a commodity.

But wholesale prices are going up, he said, and “choice customers,” or those buying on the open market like REC Silicon, are seeing the increases.

“In the Northwest region, there’s not a whole lot of producers looking to sell because of the retirements of some of the fossil fuel generators, and the growth in the economy has tightened the market,” Barkey said. “So wholesale prices are going up.”

Barkey said energy availability is an issue as well, although less visible.

“What you and I do not see, but some people see (such as the Department of Commerce) are the businesses that do not come to Montana because they cannot get a commitment for enough energy,” he said. “And that’s likely to be an issue going forward as data centers and AI (artificial intelligence) increase the demand for electricity.”

Hedges, with the Montana Environmental Information Center, said Montana has quickly gone from having the lowest electricity costs in the region to the highest, and economic development leaders have a challenge as a result.

“That is one of the first things investors look at before they move their business to a state,” Hedges said.