Part IV: Can BEC members get their co-op to live up to cooperative principles, improve business practices, and deliver affordable power?
It’s been nearly a year since Beartooth Electric Co-operative members were hit with a steep rate hike, and some members still question the decision-making that led to the increase. This is the final installment a four part opinion series exploring concerns about electricity rates, power generation, and the future of rural electric cooperatives.
By Arleen BoydBeartooth Vigilance Committee
Approximately 4500 Stillwater and Carbon county residents own the business that provides their electricity, Beartooth Electric Cooperative (Beartooth).
Beartooth members share ownership of Southern Montana Electric Generation and Transmission Cooperative, Inc. (Southern) that provides wholesale power. Soon, if financing comes through, Beartooth members will help carry well over half a billion dollars in debt to build a power plant for a profit-making corporation, SME Electric Generation and Transmission Cooperative, Inc. (SME).
With electricity bills that may be the highest in Montana and plans to add financing for a power plant to their monthly charges, responsible Beartooth members are going to have to step up and exercise the democratic control that a successful co-op depends on. They have to demand transparency and sound business practices from Beartooth, Southern, and SME.
Owning a power plant without an investment evaluation?
If SME’s power plant receives financing, Beartooth members will pay for it for at least 30 years. With no prospectus, no return-on-investment calculation, and no vote members will make a huge investment in a highly volatile, capital intensive industry.
Members do not know why they are investing in a for-profit corporation, SME. There is no evidence that they will even use the new plant’s power.
Beartooth members must demand that SME provide all members standard investment information including:
A prospectus for the proposed plant.Withheld information including bylaws, financial documents, annual reports, and board minutes.
All contracts and agreements between the co-ops and SME.
A detailed cost analysis of the projected project including likely increases in natural gas prices, full gas and electricity transmission rate analysis, and estimates for complying with CO2 regulation which the Montana Board of Environmental Review is preparing for projects emitting as little as one tenth of that expected from this plant.
Information and transparency: standard business practice, a co-op obligation
Electric non-profit cooperatives are a hybrid form of business that, unchecked, is subject to manipulation and secrecy. Transparency allows members to track board and staff activities and protects the co-op from conflict-of-interest and other business irregularities.Information about the co-ops that are spending Beartooth money has been hard to get. Southern will not release its bylaws or annual reports and SME operates in complete secrecy.
Members can insist on improved transparency and tell Beartooth to:
Provide access to all corporate documents and financial reports.
Release financial audits and prospectus information on affiliate investments, land investments, and, if allowed at all, for-profit investments.
Give members up-to-date information including board agendas and minutes through mailings and a regularly updated website.
Inform members before major board decisions are made.
Respond openly to member inquiries.
Continue to survey members and hold informational meetings.
Provide monthly reports from Beartooth’s representative on the Southern and SME boards.
Creating a culture of transparency and democracy
A co-op fails as a democracy if it accepts elected board members as the only source for decision-making and the board releases information to justify their decisions rather than to improve them with input. Beartooth members can create a democratic, member-driven co-op starting with the bylaws and the annual meeting.
Bylaws establish the rules and contract between the cooperative and its members. A committee of members at large and board members is rewriting the Beartooth bylaws and will submit their revisions at the 2010 annual meeting. Members should read the current bylaws, call their representatives on the bylaw committee, and ask them to:
Make greater transparency and member involvement the primary mission for bylaw revision.
Review legal issues like conflict-of-interest in light of the unusual three-tiered co-op structure Beartooth currently supports.
Distribute proposed bylaw revisions to all members before the annual meeting, ask for input, and weigh suggestions before completing a final draft.
Distribute the final draft before discussing and amending it at the annual meeting.
Annual meeting and elections
Beartooth Board members and management call the annual meeting the opportunity for members to exercise democratic control. Democracy with informed voting will happen when:
Annual meeting agendas are circulated to members before the meeting with a request for additions and amendments.
Motions by members at large are accommodated, on the floor of the meeting or through prior submissions.
Information on all aspects and from all sides of important issues is circulated in advance and given equal time at the meeting.
Members are encouraged to ask questions and comment on issues.Voting for board members at Beartooth annual meetings is controlled by management and the board. To ensure fairness the co-op must:Provide incumbents and challengers equal time at the meeting and equal opportunity to present their qualifications at the meeting and in mailings.
Allow all members to vote, with mail-in ballots counted along with those cast at the annual meeting. Encourage nominations from the floor according to bylaw stipulations.
Engage an independent election consultant to evaluate Beartooth procedures.
Get the information, check the facts
The financial risk associated with the planned SME venture in power generation and the fact that it is being carried out in secrecy make it the most vivid example of what happens when cooperative principles and transparency are ignored.
There are many other examples of misleading statements that have caused Beartooth members to ignore important issues, accept poor decision-making, and cast uninformed votes.
Statements calling the current BBB bond rating for the new plant “investment grade” and “very favorable with a very positive impact on the interest rate that will be realized” are not accurate, but imply that plans for a new plant are financially sound.
To justify the original over-scaled and badly planned Highwood venture members have been told repeatedly that the RUS (Rural Utility Service) lied – they “reneged” on a “letter of commitment” because of environmentalists. There was no letter of commitment. The rejection letter listed four reasons for denial including the fact that 40% of the plant’s capacity was not needed by members. RUS finances plants to serve members, not to market electricity.
With real transparency and information, members who pay attention can challenge inaccurate statements. More importantly, they can work together to make Beartooth a co-op that lives by the cooperative principles, employs sound business practices, and delivers affordable power.
Sources of information and copies of reports cited in the series are available from the author or Beartooth Vigilance, 962-3815.
Thursday, December 31, 2009
Tuesday, December 29, 2009
Mary Jolley - 58%
Well, according to Montana Code Annotated 2009, it's not:
2-3-203. Meetings of public agencies and certain associations of public agencies to be open to public -- exceptions. (1) All meetings of public or governmental bodies, boards, bureaus, commissions, agencies of the state, or any political subdivision of the state or organizations or agencies supported in whole or in part by public funds or expending public funds, including the supreme court, must be open to the public. [emphasis added].
Monday, December 21, 2009
CITY-COUNTY HEALTH BOARD
One opening for a three-year term through December 31, 2012. The City-County Health Board oversees the operation and management of the City-County Health Department. The Board meets on the first Wednesday of the month at noon eleven months out of the year. For more information about the Board, contact the City-County Health Department at 791-9260.
COMMUNITY DEVELOPMENT COUNCIL
The Community Development Council has two openings. The Council consists of ten members appointed by the City Commission. The Community Development Council reviews CDBG funding applications and makes recommendations to the City Commission concerning funding from the City’s annual Community Development Block Grant. Interested applicants must be live within the city limits. The Council meets on demand, generally in February and March. For more information, contact Chris Imhoff at 455-8407.
Deadline to apply is Wednesday, December 30th.
Friday, December 18, 2009
I wish to formally request a copy of the 2008 IRS Form 990 filed by Southern. I do not have the time or inclination to register with guidestar.org (as Ms. Balzini suggested) and expose personal information to them and also be subject to fees and marketing schemes. This 990 document is also essential for Burns and McDonnell to scrutinize as well as we the general public.
As a citizen of the state of Montana, I make this request under the Montana Public Records Act and MCA 2009. Frankly, I'm tired of the sophistry and intend to ask for any documentation, records and notes produced or obtained by any public official attending a Southern meeting as allowed under MCA and the Public Records Act. The routine response that 'it's all under litigation and forbidden' is quite inadequate. If we citizens cannot attend Southern meetings, then we certainly have a right to PUBLIC records, as Southern is an entity that benefits from the public funds of the City of Great Falls.
I fully understand the complexity of trade secrets and such, but certainly records can be redacted. I don't care about what Southern might pay for a turbine part, but citizens do care about what's impacting our city, especially fiscal obligations and our equity. Feel free to have the city attorney consider this request along with the city clerk and I await your advice and response. I am proud of our federal and state constitutions and expect them to be honored and complied with please.
Richard D. Liebert
Could this be a sign the city manager is waking up? If he isn't, he better. As I understand it, he has a job review coming up in three months.
Thursday, December 17, 2009
It’s been nearly a year since Beartooth Electric Co-operative members were hit with a steep rate hike, and some members still question the decision-making that led to the increase. This is the third in a four part opinion series exploring concerns about electricity rates, power generation, and the future of rural electric cooperatives. The final installment will run the last week of December.
By Arleen Boyd
Electric cooperatives have done a good job for rural America. They accomplished their original mission by bringing electricity to rural areas that were almost entirely without power before 1936 when the Rural Electrification Administration provided $100 million for rural power development (approximately $1.3 billion in today’s dollars).
Today, electric co-ops provide electricity to 42 million people in 47 states. Despite serving fewer customers per mile of line than other utilities, nonprofit electric cooperatives, for the most part, supply electricity at rates comparable to or lower than investor owned utilities.
Programs help electric cooperatives succeed
Cooperatives are owned and controlled by the people using their services. Unlike for-profit utilities whose mission demands a return for stockholders, nonprofit electric cooperatives receive government support because their sole purpose is to supply affordable, reliable power for members. Electric cooperatives are given legal advantages like:
•Nonprofit tax status that removes the obligation to pay federal or state income taxes.
•Low interest loans, loan guarantees, grants and program assistance from the Department of Agriculture’s Rural Utility Service (RUS)
•Very low cost (at cost) power from government supported providers like the Western Area Power Administration and Bonneville Power.
•Exemption from regulation by the Public Service Commission in Montana
Requirements for gaining the co-op advantage: Cooperative Principles
In return for these advantages and what amounts to an unregulated monopoly on rural electricity business in co-op areas like Montana, nonprofit electric cooperatives are expected to focus exclusively on their members’ need for affordable, reliable electricity; meet nonprofit business standards; and observe the cooperative principles.
The cooperative principles, universally acknowledged by co-op organizations across the country, are the criteria for nonprofit electric cooperative status.
•Voluntary and open membership
•Democratic member control – Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions.
•Member economic participation – Members contribute equally to, and democratically control, the capital of their cooperative.
•Autonomy and independence -- Cooperatives are autonomous, self-help organizations controlled by their members.
•Education, training and information -- Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives.
•Cooperation among cooperatives
Concern for community
How does Beartooth Electric Cooperative measure up?
Cooperative Principles – In recent testimony before the U.S. House of Representatives’ Agriculture Committee, Glenn English, CEO of the National Electric Cooperatives Association, emphasized that cooperatives are “closely regulated by their consumers” as they are owned and controlled by the consumers they serve.
In contrast, John Prinkki, Beartooth board president, says that the “control and regulation” belong to board members, that elected board members have the authority to make decisions, and that there is no obligation to consult with members or share information about board decisions.
Democratic control by members can only happen when members cast informed votes about issues they understand and for candidates who have made their positions and qualifications clear. Until Beartooth pays attention to principles numbered two through five, it will not meet the requirements for democratic control.
Beartooth policy requiring signed, witnessed requests for financial statements, which are by law public documents, is only one example of the co-op’s poor understanding of what democratic control is all about. Procedures for attending a board meeting or knowing what is on a board agenda are difficult. The Beartooth website provides no links to documents like bylaws or financial statements.
Members need information about issues facing the board, especially when major investments in a for-profit venture like SME’s proposed power plant are being made. Members can “actively participate in setting their policies and making decisions” only when the board provides opportunities for all members to review and comment on important issues like the bylaw revisions that currently are underway.
Affordable, reliable electricity? Beartooth Electric Cooperative charges may be the highest in Montana. Beartooth members pay 50 percent more per kilowatt hour than local NorthWestern customers.
Nonprofit cooperative business standards? Like for-profit corporations nonprofit organizations must meet business practice and ethical standards. Beartooth management says it is updating business practices and improving responsiveness to members.
Legal requirements for transparency and conflict-of-interest policies are crucial. Transparency is limited at Beartooth, so we do not know how issues like conflicts of interest are handled by the board. There is a potential for serious conflict-of-interest violation when the Beartooth board president who represents the retail consumer also is an officer on the Southern wholesale co-op board, and on the board of SME, the for-profit electricity supplier to the co-ops. Objectives conflict when SME needs to get the best possible price for its product; Southern needs a price that will maintain its operational margins; and the Beartooth retail co-op needs the lowest possible price for members.
The next article will answer these questions:
How do we improve cooperative democracy and business standards at Beartooth?
What sources of information can Beartooth members use to better understand their co-op and the issues facing the board?
Do members have any rights to information about decisions being made at Southern and SME?
Bill says he doesn't have any "strong feelings" about holding the title, but then accuses Mike of taking a "potshot" before he assumes office.
Who would you like to see in this position? Take my unofficial poll and let us know what you think.
On the agenda was the reappointment of two ECP board members; Ebeling and Golie. Several members of the audience and two new commissioners, Mayor-elect Winters and Fred Burow, requested that the current commission table these appointments.
Not surprisingly, they did not. They voted 4-1 (Jolley dissented) to reappoint.
Commissioner Bronson was so upset that he even interrupted the mayor when she was calling for the vote. He proceeded to bloviate about why this action needed to be taken. Yes, Mayor-elect Mike is correct when he said that he felt Bronson was "talking down" to the new commissioners; he was. In fact, he was talking down to everybody, which is nothing new.
His argument, that the board needed to be filled so that business could be conducted in the new year, is ridiculous; three members constitutes a quorum, which they would have had. And given that about the only thing this board does is approve the minutes, it's not a big deal to go into the new year without all five members.
The hypocrisy is blatant; he got all worked up over the ECP advisory board reappointments, but isn't concerned at all that ECP is breaking the law by not being in compliance with its own ordinance.
Wednesday, December 16, 2009
Tuesday, December 15, 2009
The highlight of the evening will be the public hearing to adopt Ordinance 3047, which would repeal Ordinance 2956, which prohibited smokers from smoking within 20' of entrances, exits, windows, vents, etc. where smoking was prohibited. This is an emotional issue for both sides. If my very unofficial poll is an indicator, folks want the ordinance repealed. (Of 39 votes, 53% think the ordinance should be repealed; 25% said no; 15% want it rewritten and 5% don't care).
Another bone of contention is the reappointment of Lee Ebeling and George Golie to the ECP board. According to the city, reappointments don't require public notification . Since these guys think they should be given another opportunity to do nothing, they should get it. An interesting sidebar to this situation is that the Burns and McDonnell report recommended this board be reduced to three members (no reason given). It will be very interesting to see how this plays out.
Saturday, December 12, 2009
Appointment of Council Officers for 2010
Discussion of Council Goals for 2010
Neighborhood Watch Training
Status of Gibson Park Lighting Project
Where: Heritage Baptist Church, 900 52nd Street North
Friday, December 11, 2009
Here is Part II:
It’s been nearly a year since Beartooth Electric Co-operative members were hit with a steep rate hike, and some members still question the decision-making that led to the increase. This is the second in a four part opinion series exploring concerns about electricity rates, power generation, and the future of rural electric cooperatives.
By Arleen BoydBeartooth Vigilance Committee
Members of Beartooth Electric Cooperative (Beartooth) finance three cooperatives: Beartooth, Southern Montana Electric Generation and Transmission Cooperative, Inc. (Southern), and SME Electric Transmission and Generation, Inc (SME).
Most members do not understand the need for two G&T cooperatives. Some see a hierarchy with SME at the top, planning to generate electricity that Southern will buy and then sell to Beartooth, which has contracted to buy all of its power from Southern through 2048.
The farther up this electricity supply chain members go, the less information they find about their co-ops.
Tim Gregori, General Manager of Southern and Director/Registered Agent of SME says Beartooth members actually are not members of his two cooperatives and, therefore, are not entitled to information. Their lawyer agrees.
After Gregori denied Beartooth members permission to attend Southern’s annual meeting last March attorney Brian Holland listed the co-ops belonging to Southern and SME and wrote, “Each of these cooperatives has its own members, but being a member of one of these cooperatives does not make one a member of either Southern or SME.” He added that Southern’s bylaws “are not available to the public.” Holland’s promised response to requests for clarification of Southern versus SME responsibilities and a Highwood financial report has never arrived.
There is much about these three co-ops that members have been denied access to or simply cannot reconcile. This is an uneasy position for co-op members who are being asked to take on hundreds of millions of dollars in debt to build a power plant, without information about its justification or how the bills will be paid.
This opinion piece looks at Southern and SME. Next week’s piece will examine the structure and advantages of cooperative organization and look at how Beartooth Cooperative measures up.
What do and don’t we know about our generation and transmission co-ops?
Many cooperatives have excellent websites with access to financials, bylaws, plans, and staff. Southern has a one-page site listing its members and sources of power. SME has no website.
Southern and SME share an address.
Southern: our sole source of energy, not much information
Southern was formed when Tim Gregori and five co-ops (Beartooth, Fergus, Mid-Yellowstone, Tongue River and Yellowstone Valley) left Central Montana Electric Cooperative in 2003. Gregori and Prinkki cite unfair rates as the reason for leaving. Central Montana members also recall disagreement with Gregori’s wish to build a power plant.
Southern buys power from Western Area Power Administration, Bonneville Power Administration, and PPL to supply wholesale electricity to its member cooperatives. Southern plans to build a gas-fired generation plant. No business plan or financial justification for Southern’s proposal has been presented to Beartooth members.
Tim Gregori says that Southern has only six official members, so Beartooth members are not entitled to attend its annual meetings, even though other non-members routinely attend. John Prinkki, Beartooth board president and one of Southern’s six members has not reported on Southern’s meetings or financials to Beartooth members.
Southern will not supply its 2007 tax return to Beartooth members, but it appears on guidestar.org which provides information on nonprofit organizations. Southern’s accountant reports that its 2008 Form 990 should be available on that site soon.
Southern will not provide its bylaws. They are filed with Yellowstone Valley Electric Cooperative’s lawsuit against Southern which is available at the County Courthouse in Billings from the Clerk of District Court.
Beartooth policies require written, witnessed requests for information. Requests sent to Beartooth on November 18 asking for Southern’s Form 990 and the tax return for SME have not been answered.
SME: follow the money, if you can
In April, 2008 SME was incorporated in Montana as a nonprofit cooperative, excluding YVEC from membership after YVEC filed suit to leave Southern.
John Prinkki says that SME is responsible for building the Highwood Generating Station while Southern will fund it. He says that SME pays no salaries and does not compensate its board members. Southern pays Tim Gregori more than $200,000 per year and reports board member fees and expenses of $123,316 in 2007 and $53,570 in 2008.
It appears that SME has no bylaws, no financial reports and no tax documents available to the public. It is not clear how money goes from Southern to SME or how decisions are made between the co-ops.
SME is the registered owner of the Highwood plant land in Cascade County and has paid for services at the site. The Electric City Power executive director has said that SME spent approximately $20 million of the $40 million spent on the failed Highwood coal-fired plant.
Economic control by members and democratic decision-making are guiding principles for co-ops. By defining this cooperative narrowly (four members) SME withholds the right to information from Beartooth members while holding them financially responsible for its business.
SME filed with the Montana Attorney General’s office as a nonprofit cooperative. Asked about finding SME’s federal nonprofit tax return on guidestar.org, however, SME’s accountant reported that “SME, unlike Southern, does not need to file a 990 – the way it is incorporated does not require it.” This may mean that SME recorded less than $25,000 in revenue, allowing it to file a 990 short form or that it filed a corporate 1120 tax return, which would be harder to understand. Either way, the return will not be seen by the public.
Conflict of interest The triple co-op structure creates many conflicts of interest. One example is support for conservation programs. As board president, John Prinkki is responsible for conservation efforts at Beartooth. As Southern’s board vice-president, he suffers when Southern sells power back to PPL at a loss because of Beartooth’s reduced consumption. As vice-president of SME, Prinkki’s mission is to build a power plant and sell its electricity. If SME is a co-op, 85 percent of that power must be sold to its members. Prinkki’s three responsibilities conflict.
With Beartooth members seeking information and circulating a petition to require member approval for major spending, Gregori and Prinkki need to answer these questions:
Why do we need two generation and transmission cooperatives?
Why do we need a power plant?
Why is information about Southern and SME being kept from Beartooth members?
How will you increase transparency at the co-ops?
Wednesday, December 9, 2009
On Monday night, Travis braved the weather and, in his words, the sublime comedy that can be ECP meetings, and attended their board meeting.
"Also, Mr Eberling let it be known that he would like to be reappointed. (His term expires at the end of this month.) Ms. Balzarini said he should make that intention clear this week because the city commission meets next Tuesday.
Whoa there nelly! With respect to Mr Eberling, I think any reappointment by the outgoing city commission would leave an extremely bad taste in everyone’s mouth. I think the practical outcome of the city election should be some diversity of opinions on the ECP Board".
Not only would it leave a very bad taste in everyone's mouth, but to the best of my knowledge, as I already mentioned, there has never been any public posting of these openings. (Golie's term expires as well). He can't just be reappointed because he wants to be.
Oops. I just remembered. This is ECP. They don't need no stinking laws.
They went to the city and were told by the Community Development Department it was OK.
But it wasn't OK, according to the Planning Department.
What bothers me is that they were told it was OK by one city department, more than once, but another department comes along and says no, according to the ordinance, you can't.
This is nuts. How in the world are citizens supposed to abide by the laws when various city departments have a different understanding of how those laws read?
According to Acting City Attorney, Chad Parker, "Bocock and Reichert might have received the go-ahead from the Community Development office, but he said the Planning office would have been a better choice. Animal control officers also could have helped, according to Parker".
Don't blame the citizens Chad. They did the right thing. They contacted the city. The fact the city doesn't know which end is up is not their fault.
The city is the one with egg on their face, not these folks.
Monday, December 7, 2009
When: Thursday, Dec. 10 at 7:00pm
"If you can't tell the truth, dazzle them with BS".
Saturday, December 5, 2009
EXECUTIVE DIRECTOR REPORT
HGS Asset Impairment
WREGIS Account Holder Registration Agreement
* Accept Board Meeting Minutes from November 2, 2009
* NWE Natural Gas Utility Unit Rate Adjustments/Proposed Rates and NWE Monthly Electric Supply Tracker Rate Change Detail – December
* Burns & McDonnell report/recommendations
* Great Falls Tribune on-line vote results and articles of November 25 and 28, 2009, regarding Burns & McDonnell’s report
* Board terms expire December 31, 2009; Ebeling and Golie
BOARD MEMBER REPORTS
* S& P’s bond rating - follow-up memo and general summary chart
* Judith Gap Wind Farm – Director Ebeling presentation
Handouts from November 2, 2009, meeting
NEXT ECP BOARD MEETING
January 4, 2010
Part I: BEC members face high priced power, debt
It’s been nearly a year since Beartooth Electric Co-operative members were hit with a steep rate hike, and some members still question the decision-making that led to the increase. This is the first in a four part opinion series exploring concerns about electricity rates, power generation, and the future of rural electric cooperatives.
Beartooth Electric Cooperative electricity charges may be the highest in Montana. Beartooth members’ residential rates dramatically exceed those of their close neighbors who receive electricity from NorthWestern Energy, even though Department of Energy records show co-op rates running below those of investor owned utilities like NorthWestern for the past 30 years.
An October electric bill for a residential customer using 1000 kilowatts shows bundled supply and delivery costs (total electric bill) of 9.36 cents per kilowatt hour for NorthWestern and 13.50 cents per kilowatt hour for Beartooth, not including Beartooth’s monthly surcharge. Adding the surcharge, which covers the member’s share of approximately $40 million spent on the failed Highwood coal-fired generation plant, brings the Beartooth cost to14.38 cents per kilowatt hour.
For Beartooth: one source of wholesale power, recurrent price increases
Beartooth Electric Cooperative is a member of Southern Montana Electric Generation and Transmission Cooperative (Southern) which sells wholesale power to five member cooperatives and Electric City Power in Great Falls. Beartooth recently signed a contract to buy power from Southern through 2048.
A statewide survey conducted last year reported that Southern, Beartooth’s sole electricity supplier, charged its member cooperatives the highest power rates of any generation and transmission cooperative in Montana. In 2009 Southern raised the rate it charges member cooperatives five times. Members have been told to expect another increase in January 2010.
Southern buys power from Western Area Power Administration, Bonneville Power Administration, and PPL Montana. With the BPA contract expiring in 2011, Southern signed a contract in March to buy additional electricity from PPL Montana. Southern and Beartooth have not shared the terms of that contract with co-op members, but PPL reports that a majority of the electricity it generates is sold through fixed-priced, long-term competitive contracts. PPL says, “That means that our prices do not change during the term of the contract — no matter what the market does.” NorthWestern Energy also buys power from PPL.
Southern buys inexpensive power from WAPA and Bonneville and predictably priced power from PPL. Beartooth and Southern have not explained why the recurring increases in electricity rates have apparently been unanticipated.
A risky and expensive strategy
Tim Gregori, General Manager of Southern, has announced plans to build a 120-megawatt gas-fired power plant. He projects a cost of $100 million for phase-one of this project, calling that low compared to the $1 billion price tag for Southern’s failed coal-fired plant.
A revealing Standard and Poor’s credit report evaluates the proposal: a $270-million project with three phases of 40 megawatts of power each. The first two phases come online in 2011 and the third in 2012. Delivering a BBB rating, S&P notes management’s lack of experience in plant operation, execution risk in the power supply strategy, and above average retail rates. Favorable factors include a stable customer base and lack of regulation in Montana, allowing the company to set rates as it wishes.
Interest costs for the project are not yet known, but the spread between the best A-level ratings and BBB, one of the worst, suggests a double digit rate which would nearly triple the amount required to repay a 30-year, $270-million loan.
If $270 million was borrowed through a 30-year loan using the S&P analysis ($270 M) at a 10 percent interest rate, the monthly payment would be $2,370,000, racking up $583,289,000 in interest, for a total cost of $853,289,000 over 30 years.
Using a $250 million estimate with lower interest rate of 8 percent, the monthly payment would be $1,835,020, generating $410,607,432 in interest, for a total of $660,607,432 over the lifetime of the loan.
Last week one more concern for members and potential investors arose when an audit ruled that $9.1 million of what Southern had booked as assets related to the original Highwood plant were impaired. The $9.1 million must be written off by the member cooperatives.
A good idea for Beartooth members?
Gregori says building this plant will secure members’ power supply. Beartooth President John Prinkki says that financing the new plant will absorb Beartooth’s short-term debt for the failed Highwood plant, eliminating the current surcharges by stretching the payments over a long-term loan. Prinkki cites the NorthWestern Energy plan to build a similar plant as evidence that building a plant is a good idea.
NorthWestern plans to build a 200-megawatt gas-fired plant at Mill Creek for regulation services and firming. Regulation service and firming plants keep the transmission grid in balance by matching electric generation with electric load on the system on a moment-by-moment basis.
Since Southern does not generate baseload power, it needs neither regulation services nor firming capacity, the standard uses in our area for gas-fired plants. If Southern wants to build a gas-fired baseload plant, Gregori and Prinkki should explain that unusual strategy to Beartooth members. NorthWestern’s 332,000 Montana customers will share the costs for its plant. Assessments for Southern’s plant will go to fewer than 50,000 ratepayers.
More power than needed?
Gregori and Prinkki assert that the PPL contract will meet members’ needs through 2019. Currently Southern does not use all the power it buys from PPL and is selling it back to PPL at 85% of the market rate, which is lower than Southern’s contracted rate.
Co-op members are about to become sellers of electricity – indebted sellers of electricity. With the new Highwood project co-op members will pay for construction and operation of a plant in addition to paying for their electricity. They will pay that extra cost to generate power they do not need in order sell it into an uncertain market.
Beartooth members have been given no information indicating a financial benefit from this plan or how it falls within the cooperative’s charter. The leaders who kept members in the dark about the failed Highwood coal plant need to meet with members, justify this project, and answer the following questions:
Why and how will a new loan absorb the old Highwood debt?
What is the Beartooth share of the $9.1 million write-off?
Where are the cost/benefit analyses for the buy versus build power strategies?
What are the anticipated operating costs for the plant?
What overhead will Southern and Beartooth pay to manage development and implementation of a power plant?
Thursday, December 3, 2009
Wednesday, December 2, 2009
Several commented that the ordinance is not wrong; the fact that a few businesses are evidently having a problem complying doesn't constitute doing away with the rule entirely.
On December 15, a public hearing will be held and a decision may or may not be made at that time.
What do you think? Take my very unofficial poll and share your thoughts.
Tuesday, December 1, 2009
Two councils are meeting this week:
We encourage you to provide your knowledge, opinions and feelings about fair housing and housing choice.
Go to http://www.greatfallsmt.net/people_offices/cdev/fairhsg.htm to view a copy of the last Analysis of Impediments prepared by the City.
Fair Housing Specialist
Community Development Department
City of Great Falls
Great Falls, MT 59403
The ECP board has two openings, but they were not posted. Why?
Yes, I know the $60,000 consultants recommended this board be reduced to three members, but we didn't hear of that news until last week. And besides, there has not been public action taken to reduce this board's numbers.
Since 2007, when the State legislature refused to allow ECP to sell power to residential residents, Northwestern Energy has refused to allow ECP to provide new electric meters to its existing customers. ECP turned to the PSC for help, but was rebuked.
In February 2009, ECP sued the PSC; however, the City Commission never publicly voted to do this. (At the Feb. 2 ECP board meeting, Coleen said the deadline to file the suit was Feb. 17. When I pointed out that Feb. 17 was the next scheduled City Commission meeting, she finally, after her usual facial contortions, indicated the City Commission could hold a special meeting. They never did).
No big deal though, because according to Coleen Balzarini, the fine is only $5,815 more than if ECP had complied with the rules in the first place. (Travis also explains why this is not the case). He also disagrees with her statement that this fine will be passed onto existing customers. Hard to do since some customers have fixed rates and their contracts can't be adjusted.
As usual, everything and everybody else is to blame for ECP's ongoing ineptness. Thankfully, the PSC didn't buy into their lame argument and did not grant them "mercy", as Coleen had hoped they would.
As Ken Toole, Vice Chair of the PSC board, indicated: "It's important that the the rules are consistently applied".
Too bad the City of Great Falls doesn't consistently apply the rules. If they had, ECP would have been dissolved a long time ago and we wouldn't be going through this mess.