PART II - Editoral From Beartooth Co-op Member

Here, I posted Part I of an editorial by Arlene Boyd, a member of the Beartooth Vigilance Committee.

Here is Part II:

Supporting three co-ops, Beartooth members lack information
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?

Beartooth Vigilant Committee Continues To Fight

This is a guest editorial in the March 5, 2010 Billings Gazette from a member of the Beartooth Co-op:

Beartooth co-op shouldn’t pay for plant it can’t use
ARLEEN BOYD

Beartooth Electric Cooperative members pay the highest electricity rates in Montana. Our rates rose 25 percent in 2009 and will rise again next month. Now we are about to add to our electricity bills payments on an $85 million loan for phase one of a major power-generating project.

Southern Montana Electric Generation and Transmission Cooperative Inc. (Southern), Beartooth’s wholesale electricity provider, contends that building a generating station will secure our power supply and lower our bills.

There is no evidence that Beartooth members will be able to use any power from this plant before 2019, when Southern’s all-requirements contract with PPL Montana, which supplies our power, ends. Yet, we will begin paying immediately for Southern’s gas-fired Highwood Generation Station described by Standard and Poor’s as a $270 million, three-phase, 120-megawatt facility. Southern has recorded financing agreements for the first 40-megawatt phase of the project.

Beartooth members already are paying off debt for Southern’s first effort at power generation. Southern and its for-profit development arm, SME Electric Generation and Transmission Cooperative Inc., spent nearly $40 million on the 250-megawatt coal-fired Highwood Generation Station before failing to finance it.

It is hard to see how Beartooth, a very small co-op with low electricity demand, can realize a positive return on the $4 million to $6 million it already has invested in Highwood Southern has six members: four small co-ops, Beartooth, Fergus, Tongue River and Mid-Yellowstone; Yellowstone Valley Electric Cooperative, which has filed suit to leave Southern; and Great Falls Electric City Power commercial customers, recruited to justify the original 250-megawatt plant.

Beartooth members have repeatedly underwritten Southern’s expenditures without information or open discussion. Without our knowledge, Southern placed the co-ops’ cheap federal hydropower into a “blended supply.” This allowed Great Falls, which cannot qualify for the federal power on its own, to save $20,000 to $50,000 per month while our rates rose 25 percent.

Electric co-ops pay no state or federal income tax, get low-interest government loans and buy the lowest cost power in the country from federal power-making authorities. In return, they must deliver at-cost, reliable power to rural customers and abide by the universally recognized cooperative principles: democratic decision-making, member control of capital and open information. The principles require Beartooth, Southern, and SME to make the following changes:

• Provide information and insure transparency.

• Pay Beartooth for the power it funds but cannot use.

• Assume no further debt on Beartooth’s behalf without member approval.

• End the conflict of interest for Beartooth’s board president, who simultaneously represents the differing interests of Beartooth, Southern and SME.

Beartooth’s board president serves on the boards of Southern and SME. He represents both sides in negotiations between Beartooth and Southern or SME. This conflict of interest is bad business practice and bad for Beartooth.

Arleen Boyd of Fishtail is a member of Beartooth Electric Cooperative.

PART IV - Beartooth Member Editorial

This is the final installment in a four-part opinion series written by Arlene Boyd, a member of the Beartooth Vigilance Committee. Parts I, II and III are here, here and here.

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 Boyd

Beartooth 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
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.

Beartooth Vigilance Committee Weighs In

The following editorial was recently written by Arleen Boyd, a member of the Beartooth (cooperative) Vigilance Committee. Hat tip: C.B.

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?

PART III - Beartooth Member Editorial

See Parts I and II here and here.

This is Part III in a four part editoral series written by Arleen Boyd, a member of the Beartooth Vigilance Committee:

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Rights and responsibilities go hand-in-hand for electric cooperatives
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

Beartooth Vigilance Committee

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?

Beartooth Bylaws Committee Suspended

Once again, Beartooth Co-op is being jerked around by SME. In the lastest go-around, their Bylaw Committee has been suspended (page 2).

Below is a response from co-op member and avid advocate for transparency, Arlene Boyd:

Beartooth Co-op Board needs to support open, transparent bylaw revision, now.

The “suspension” of the Beartooth Electric Cooperative Bylaw Committee is very disappointing. Without consulting members at-large or the members of the bylaw committee, the Beartooth Board of Trustees has stopped the committee’s work.

Bylaws are the contract between an organization and its members. Co-op bylaws define procedures for the organization and specify member rights and responsibilities.

Most of us do not understand the reported connection between a postcard sent out by the Stillwater and Carbon County Resource Councils and the board’s decision to suspend the bylaw committee. If the Beartooth Board objects to the councils’ postcard supporting mail-in elections they should take the matter up with the councils. There is no reason to shut down the bylaw committee, which represents Beartooth members, not the councils.

We have the highest electricity rates in Montana. Our wholesale supplier, Southern Montana Electric (Southern), a cooperative we established and finance, operates in bylaw-permitted secrecy. Southern spends enormous amounts of our money without informing us, seeking our input, or asking for our approval. The bylaws are much more important than an irrelevant spat about a postcard. They are even more important than mail-in balloting which is only one aspect of a fair election process.

It is time to thank the board and the committee members for their hard work and to insist that they reconvene and provide a transparent bylaw review process with open reporting and opportunity for member input. The bylaws need to be updated and revised with three objectives:

• To ensure that Beartooth has appropriate legal operating guidelines
• To provide strong support for transparent governance and democratic decision-making
• To require procedures for informing and involving members in all aspects of co-op activity.

Boards and committees can get caught up in controlling their process and forget what the process is supposed to do. Let’s not let that happen at Beartooth.

Arleen Boyd
Fishtail

Resignation Called For

Beartooth Electric Cooperative is calling for the resignation of their president, John Prinkki:


FEBRUARY 15, 2010
OPEN LETTER TO ALL CONCERNED
TO: John Prinkki, Beartooth Electric Cooperative Board President
Subject: Resignation Request, for cause

At our Joliet Town Hall Meeting on January 16, 2010 and a meeting held for Beartooth Electric Cooperative (BEC) members in Clark, Wyoming, a consensus was reached to ask for your resignation. I volunteered to write the request. The BEC members can no longer tolerate or afford the actions of yourself and Tim Gregori of Southern Montana Electric (SME).

It was reported that SME wrote off $9.1 million dollars in 2009. The 2008 income tax report of SME showed that the $9.1 million was written off in 2008. For you to keep this a secret until after the annual BEC meeting and your re-election to the board is intolerable. It constitutes fraud, if not criminally, it was morally wrong. This withholding of the $9.1 million write-off rendered the BEC financial statement presented at the 2009 BEC annual meeting invalid. The members who re-elected you at that meeting did so under false pretenses.

For BEC members to be paying for electricity for Northwestern Energy customers, Southern Montana Electric members and Electric City Power members is ludicrous.

I will remind you that The Beartooth Vigilance Committee presently has over 300 signed petitions for revision of the BEC Bylaws. That is more than the membership present at the 2009 BEC annual meeting. BEC has over 4000 members and there was less than 200 members who voted at the annual meeting. There is something wrong with that.
　
Larry Luloff
Beartooth Vigilance Committee
208 Stormitt Butte Road
Roberts, MT 59070
406-962-3815


c.c. Ron Roodell
Beartooth Electric Board Members

Where Did $25 Million Come From?

Yesterday, in Joilet, Beartooth co-op members held a meeting to discuss their rate increases, their management and the direction of their electrical future.

According to one member's calculations, $41 million has been spent, but only $16 million can be accounted for as coming from the co-ops. Where did the rest come from? (SME and Beartooth representatives were invited to the meeting, but didn't attend).

These folks aren't able to track the spending, because just like the problems we are facing in Great Falls, the records are confidential.

As another by-product of this fiasco, homes that are for sale, which are currently being serviced by Beartooth, are not selling.

One co-op member indicated that more than one Beartooth board member might be open to the idea of selling Beartooth's interest in Highwood.

Stay tuned.

"Fast-Talking Captain Leaves Sinking Behind"

Here is a whimcisal look at SME: (A letter to the editor at the Billings Gazette):

Five years ago, five rural Montana electrical co-ops, including Beartooth, became convinced their mother ship, the USS Bonneville Power Administration, was sinking.

A lifeboat appeared, captained by a rather dapper gentleman, talking really fast. "I am here to save you!" called the captain, pointing to the dog picture and charts. "This puppy's 'Highwood.' He's a big'urn all right: more'n twice what you need. But that's his beauty: we'll sell the extra power to fools not as smart as us for more'n twice what it costs. 'Highwood' won't cost a penny over $440 million: a bargain at twice the price. Sign here."

Global warming and coal's massive role in it were apparently unconsidered.

After checking with some "experts," mostly certified by the captain, everybody signed. Signed what? "Can't say: trade secrets.

"Citing a projected $990 million plant cost and no market for half the power, Highwood's prospective financier, Rural Utility Service, declined. Wall Street's 10 percent loan sharks now circled the lifeboat. Shouting, "Stay the course!" the captain cursed arithmetic, environmentalists and Henry Waxman.

YVEC jumped overboard anyway. The captain celebrated by donning a bigger hat over his first. Beartooth, shorn of capital and any marketable power contracts, raised rates 50 percent. Members squawked: the increase was cut, the interval doubled. Highwood's picture was retouched: more svelte by half, and no cigar.

Isn't it time for the lifeboat to leave? Who, besides the captain, will be aboard? Beartooth's Board? Beartooth's new manager? Brad Molnar? Scott Boggio? The rest? Not a chance: They're overboard.

Charlie Donnes
Red Lodge

"Pimping For Highwood"

I received the following information pertaining to actions being taken by Beartooth Coop to protect their interests from SME.

The first item is a request for a special meeting of the members to amend a portion of their bylaws. The amendments are noted.

The second item is a letter to the editor written by a member of the Beartooth Vigilance Committee to the Billings Gazette.

These folks are finally coming around.

Beartooth Concerns

Last Tuesday, Feb. 3, Beartooth Co-op met with their members for an informational meeting.

Here are the members' questions and the answers provided.

Ask Me No Questions And I'll Tell You No Lies

"One of the reasons we weren't transparent before was because no one was asking questions," Prinkki said.

This quote came from John Prinkki, newly re-elected Beartooth-Co-op president and a director of SME, at Beartooth's annual meeting this past Saturday. This gem of an admission came after members commented about the need for more transparency concerning their relationship with SME.

At the same meeting, Prinkki said that long-term financing for the gas plant "appears probable within the next few months". He did concede after the meeting that "we've been here three times. There are no guarantees".

Can anybody out there remember how many times Gregori has told ECP that financing was not a problem?

(Hat tip: R.L.)

SME Files Bankruptcy

For most folks, this is already old news. There remains though a serious concern that this is a valid filing, considering that a quorum of the SME board was not available to vote on the decision. To top it off, SME refused to seat new Beartooth Co-op board member, Arlene Boyd. After filing for bankruptcy, the board also voted to increase wholesale power rates by 20%. Beartooth is going to fight. Good for them.

Beartooth Backs Off

After receiving numerous complaints from their customers, officials at Beartooth Electric Co-op reduced the amount of the surcharge they tacked on to their December bills.

According to the article, the reduction in the surcharge means that it may be on the bills longer than initially planned.

On Tuesday, Feb. 3, the co-op is going to hold an informational meeting. According to the co-op president, John Prinkki: "We're going to talk about where we were, where we're at and where we're headed."

I think where they're headed is a no-brainer.

Hat tip: Rich

"We're Financially Sound", but...

"We just don't have any operating cash".

Those are the words from John Prinkki, president of Beartooth Electric Co-op, a member of SME.

According to this Tribune article, Beartooth customers have seen their power increase by 50%. The president blames the problems on financing complication caused by "environmentalists" who have challenged the air-quality permit. He claims this delay is the main reason for the increase.

Customers were told in September their rates would go up about 16%. Evidently, after that board meeting, it was determined the rates would be higher.

This does not come as a surprise.

Annual Meeting Not Open To The Public

Today, Southern is holding their annual meeting in Billings, but will not allow the public to attend.

The following is an article from the Billings Gazette. There is however, one correction to be made. The City of Great Falls did not appeal Judge Phillips ruling as the last line indicates.

Co-op to keep its meeting closed

By: Linda Halstead-Acharya of the Billings Gazette:

Late last week, Southern Montana Electric Cooperative announced that its annual meeting would be closed to the public, just days before a judge ruled that thousands of co-op documents must be opened to the public.

John Prinkki, a member of Southern’s board of directors, confirmed that the annual meeting this Friday would not be open to members of the distribution cooperatives that make up Southern, the “umbrella co-op.”

Tim Gregori, CEO of Southern, said the majority of board members favor regional meetings as the best way to answer questions. If Southern’s board approves the idea, Gregori foresees a “very aggressive” schedule with meetings in Billings, Great Falls and Forsyth and Lewistown.

“After speaking with other member systems, they believe that it would be far better to use the regional meeting approach than simply opening the annual meeting because it would allow for wider participation and a better forum,” he said.

If necessary, regional meetings could be held more often in those areas where there is a higher level of interest, he said.

Before the 2009 annual meeting, members of the co-ops that make up Southern had requested an open meeting and more transparency. During an earlier interview, Gregori explained that the only members of Southern are the handful of board members who represent Southern’s five co-op members.

Prinkki said “it didn’t make sense” to open the meeting, noting that the annual meeting was expected to run 30 minutes and that most other agenda items dealt with confidential contractual matters.

Arleen Boyd of Fishtail, a member of the Beartooth Electric Cooperative who has long pressed Southern for more information, said the informational meetings are a step in the right direction, particularly regarding information dissemination and opportunities for discussion. She argues, however, that the meetings do not address the issue of transparency.

“Transparency is the timely access to information,” she said. “Transparency is achieved when members know what the current issues are and how business is being conducted — what decisions are made and by whom. This requires access to meetings, especially annual meetings, and timely access to financial and other information.”

Boyd is not alone in targeting Southern over transparency issues. District Court Judge E. Wayne Phillips of Lewistown ruled last week the cooperative must release three boxes of information that had long been withheld from the public.

Southern and the city of Great Falls filed an appeal.

The Ongoing Quest For Open Meetings

The following email correspondences represent an ongoing struggle citizens have had to gain admittance to SME board meetings. It is truly a pathetic situation when citizens have to work so hard and put up with so much in their quest to uphold their constitutional rights. The beginning of the exchange begins at the end of this posting.

Dear Mr. Brooks,

I thank you for your timely and professional response on this matter and for advising the police accordingly. My regrets the fax wasn't available for your office as I thought I had successfully transmitted from Fort Carson, CO, but I think we're all up on the issue now. We shall now see how Southern will deal with our constitutional rights, open government and citizens who insist on transparency, accountability and oversight.

Very Respectfully,

Richard D. Liebert

----- Original Message -----
From: "Brooks, Brent"
Date: Wednesday, June 16, 2010 12:54
Subject: FW: police enforcement of co-op's closed meeting

Colonel Liebert:

I am forwarding to you as promised the recent email I sent to Arleen Boyd which also contains an additional email as an attachment. That attachment is another email sent to an attorney for SME advising what I mentioned to you a few minutes ago-that I have recommended to the Billings Police Chief Rich St John that the police respond to reports that a crime is imminent or actually in progress concerning SME meetings in Billings. I do not know if SME will have private security in the future and that is a matter for its decision.

I am also attaching the May 5, 2010, letter I sent to Mr. Frank Willett, husband of Arleen Boyd which is self explanatory and contains specific statutes that authorize a challenge to an open meetings violation.

If you have any questions on any of these items I am forwarding to you feel free to email or call me as needed.

Thanks,
Brent

Brent Brooks
Billings City Attorney
P.O. Box 1178
Billings, MT 59103
(406) 657-8205 (work)
(406) 672-8316 (cell)

From: Brooks, Brent
Sent: Monday, June 07, 2010 10:28 AM
To: 'Arleen Boyd'
Subject: RE: police enforcement of co-op's closed meeting

Mrs. Boyd:
Attached is a brief email I sent last Friday to Mary Jaraczeski, one of the attorneys representing the SME Board. Billings Police Chief St John, Assistant City attorney bonnie Sutherland and I have previously met and discussed the issues on these meetings and the attach email is the result of that meeting, several phone calls from me to attorneys John Crist, Jim Santoro and Mary Jaraczeski so I could learn more facts.

Please let me know if you have any additional questions on this and I will attempt to help as much as possible. I encourage you to work with anyone within SME or within one or more of the member cooperatives to resolve the open meetings issue.

Thanks,
Brent

Brent Brooks
Billings City Attorney
P.O. Box 1178
Billings, MT 59103
(406) 657-8205 (work)
(406) 672-8316 (cell)

From: Arleen Boyd

Sent: Monday, May 24, 2010 8:08 AM
To: Brooks, Brent
Subject: police enforcement of co-op's closed meeting
Importance: High

Dear Mr. Brooks,

I am preparing my complaint regarding the closing of the May 20, 2010, Southern Montana Electric Generation and Transmission Cooperative, Inc. board meeting. As we have discussed, the meeting should have been open to the public, yet General Manager Tim Gregori declared it closed. I am attaching, again, Great Falls City Attorney James Santoro's memorandum stating the legal case for declaring Southern's meetings open.

The Billings police enforced this order of closure by parking a Billings police vehicle directly in front of the door of the building, 3521 Gabel Road, and stationing Officer Peterson at the site to remove any "uninvited" persons from the property. Officer Peterson confronted me, several other Beartooth Electric Cooperative members, and Great Falls resident Aart Dolman in the parking lot and told us that we could not even approach the door of the building. He said that we had to stay on the sidewalk.

Following are a few facts regarding this May 20 event:

* Officer Peterson was at the site at 8:20 when I arrived and the police car was parked parallel to the building, directly in front of the door.
* The officer drove the car around the parking lot after I arrived and was talking with Mr. Dolman who had arrived earlier. The officer then parked it, again, in front of the door.
* The officer told us, in the parking lot, to leave or go to the sidewalk.
* I told him that the meeting was an open meeting.
* The officer told me that the meeting was a closed meeting.
* When I pointed out that my car was in the parking lot and that I needed to be on the property to enter it he said that it was unlikely that it would be towed away but that could legally happen.

* Aart Dolman asked for a police report to be filed so that he would have a record of exactly what had transpired and what legal action was taking place to remove us from the property.
* Officer Peterson called Sergeant Berry, his superior officer, to come and discuss a report.
* Sergeant Berry gave us a report number and explained, exactly as Officer Peterson had, that the meeting was closed by the board, that the building owner had secured police support to enforce the closure, and that we would have to leave. The officers were polite. I believe they were put in a very bad position by someone in charge of police activity. They were enforcing an illegal closure of a public meeting. I have many questions about this police action including:

* Who told them the meeting was legally closed?
* Why did they accept and repeat the contention that it was closed?
* Is it a Billings Police policy to enforce "closed meetings" on private property?
* How much does it cost to station a Billings Police officer in a parking lot for three or four hours?How much does it cost to police to use a police vehicle for three or four hours as a signal that the police support the closure?

When we tried to attend the Southern Montana Electric Generation and Transmission Cooperative's annual meeting, March 19, 2010, we were met by a police officer in the lobby of the building and threatened with arrest if we did not answer all of his questions and immediately leave the property. He was not as polite as the officers who met us on May 20. He repeated several times that we were subject to arrest if we did not cooperate with a police officer's instructions. What legal right did he have to give me and several other polite and orderly people who were making no disturbance whatsoever instructions?

I will call you this morning to ask about this complaint which relates to actions taken by Tim Gregori on behalf of the Southern Montana Electric Generation and Transmission Cooperative, Inc. board and by the Billings Police Department. We did record the May 20 morning's activity with a video camera and I have pictures of the police officers talking with us.

Yours truly,
Arleen Boyd (328-6645)

Filing of Complaint against SME

It speaks for itself.

To: James Santoro, City Attorney
Great Falls, MT.
From: Aart Dolman
Date: May 24, 2010
Re: Filing of Complaint

Dear Mr. Santoro,
The following is a letter of complaint. I a citizen of Great Falls in good standing was prevented from entering the building where SME Trustees were holding a meeting at 9:00am on Thursday, May 20, 2010. The uniformed Billings City Police had responded to a request by the owner of the building not to allow me to park my vehicle on his property and prevent me from entering the building. The Police Officers also told me that the monthly SME Trustee meeting was a “private meeting” and that I was not allowed to attend.

I had received a copy of the SME Trustee Agenda meeting which was to be scheduled for 9:00 a.m. on Thursday, May 20, 2010. The Southern Montana Electric Cooperative Generation and Transmission Cooperative, Inc. (SME, or also known as Southern Montana Electric) have monthly meetings and since no City of Great Falls public official or employee could attend I decided as a Great Falls citizen to observe that particular meeting.

On the previous day, Wednesday, May 19, I had received from the City of Great Falls Administration a copy of this SME Trustee Board Agenda. I had requested this document from the Mayor of Great Falls during the regular scheduled City Commission Meeting.

In early January 2010, I had requested that the City of Great Falls Commission provide me with a copy of the 2008 IRS Form 990, line #14, p.6, which stated that this non-profit SME Cooperative had a policy on the Retention and Destruction of Documents. The IRS tax filing of a non-profit organization is a public document, and I felt that I had every right to request from SME copies of its policies.

When a month later Judge Phillips’ ruling allowed citizens to examine SME documents, I thought that it was unusual for me to wait several months without a response from the City of Great Falls and SME. When I requested again during the April City Commission meeting that I had not heard about my request, the Mayor requested that the City Clerk sent Mr. Gregori a letter requesting a response. A few days later, I received a copy of a letter signed by Mr. Gregori that my request would be honored by SME in a “timely manner.”

After receiving the SME Trustee Agenda for May 20, 2010, Agenda, I was thrilled that under item VIII the trusties would discuss the document issue during their meeting. Thus I traveled to Billings to attend that monthly SME Board of Trustees meeting. Since Judge Phillips had ruled that SME documents were open for public examination, I had no reason to doubt that I would not be allowed to hear and witness the discussion by SME Trustees.

Shortly after 8:00am, on May 20th, 2010,I arrived at the building where the offices of SME are located on 3521 Gable Road, Billings, MT., and parked my vehicle in the south side parking area next to the side walk. I waited there for Beartooth Electric Cooperative members who were also interested in attending the SME Board of Trustee meeting. About fifteen minutes later Arleen Boyd and Larry Luhoff, and three others came and parked their vehicles in the same area. There was a continued flow of people in and out of the building. Because it was a multipurpose business building, the SME Trustee meeting was scheduled to be in the building’s ECI Conference Room.

About 8:25a.m, a Billings Police car arrived in the parking area and continued to the main entrance of the building. A uniformed Police Officer went into the building and a few minutes later he left the main entrance and walked directly to our group. He introduced himself as Officer Peterson and I introduced myself as a citizen from Great Falls. After the introductions, he informed the group, without asking our reason or purpose of the visit, that the owner of the property wanted us to leave the parking area and go to the nearby sidewalk and to continue our conversation with him. He also maintained that the meeting inside the building was a “private meeting” and that we could not enter the building.

After Arlene Boyd explained and informed the Billings Police Officer Peterson that we were here to attend the SME Trustee meeting, she showed him a packet of information which included a copy of the SME Trustee Agenda and the “Open Meeting” statement by City of Great Falls Attorney Mr. Santoro. To no avail the Police Officer stated repeatedly that this was a “private meeting” and that the owner of the building would not allow us to be in the parking area and the building for it was his private property. After a few minutes of conversation, I requested from the Police Officer where I could obtain a copy of this incident report and he told me that since this was a civil matter, not a criminal one, that there would be no police report. In the meantime, I had been informed that Police Officer Peterson was off-duty and had been hired by the owner of the building for the specific purpose of keeping our group of this property. This was puzzling and troublesome for me because the owner of a multi-use building prevented me from entering a building while others were free to enter and leave. So I requested from Police Officer Peterson that I meet with his shift commander. After a short discussion, the Police Officer walked a few paces away from us and when he returned he told me that SGT. Berry was on his way to meet with us.

In about 15 minutes, Billings Police SGT Berry arrived and joined us in the parking area next to the side walk. He also stated that we could not enter the parking lot or the building. This was at the request from the owner of the building and that the SME Trustee meeting was “private.” The public was not allowed. During our discussion with the police SGT, he read a copy of the Great Falls City Attorney ruling on “Open Meetings.” After a lengthy discussion, I asked for a copy of the police report and was told that this was a civil issue and not a criminal one; therefore there would not be a report. A police report would only be filed if there was a criminal incident. Again this conversation was troublesome and puzzling for me, and I wanted to ask if there was a Police Report of an earlier incident in the same building. Some of the members of our group had been trying to observe a SME Trustee meeting last February. I had seen the video where they had been ill-treated by SME Trustee members and the owner of the building in the hall way and were insulted by negative language including in offensive gestures while they were waiting for the Billings Police to arrive. I did not want the same pattern to occur. Therefore, I asked SGT Berry that, as a law abiding citizens, how I could enter the building and observe a meeting for which I had every right to attend? Certainly, a law obeying citizen would respect the order given by the Police but yet it seemed strange that the Billings Police would allow an illegal meeting. This was the reason for my request of a Police Report. Sergeant Berry informed me that there was already a record because someone with a video camera was present. After some more amicable and civilized discussion, SGT Berry promised me that he would write a report of this event. He then requested that we give him our names, addresses, and social security numbers. The group provided him with our names, etc.

In the meantime, Arleen Boyd had made four telephone calls to the Billings City Attorney Mr. Brooks on my private cell-phone and on the last call she discovered that he had a meeting with the Billings Police Chief and another official discussing our case. They requested that we give them a copy of the SME Trustee Agenda. Since we had given our copies to others so we had none to give to SGT Berry. Arleen Boyd then suggested that the SGT ask Mr. Gregori inside of the building for a copy of the Trustee Agenda. After about twenty minutes the SGT returned and stated that he could not get a copy of the SME Trustee Agenda from Mr. Gregori. Our group promised him to email a copy to the Billings Chief of Police and City Attorney.

After shaking hands with the Police Officers, I left the parking lot at approximately 10:15am after I received a card from Police Officer Peterson which stated the number, 10-21746, for a police report.* (See attached exhibit)

Co-Op Members Not Happy

Last night, about 200 upset members of the Beartooth Co-op met with their board of directors and Tim Gregori.

From the sounds of it, there weren't many answers provided other than their problems were caused by everybody else.

Sounds very familiar.

Dissension In The Ranks

A week from now a very interesting meeting is planned in Joilet to discuss HGS, SME and an "attempt to follow the money" by requesting an independent audit of SME.

Wouldn't it be nice to be a fly on the wall at this meeting to not only hear what is being said but who actually shows up?

Exorbitant electric bills will be the subject of a meeting at 2 p.m. April 11 at the Joliet Community Center. The meeting is open to all members of Beartooth, Yellowstone Valley, Fergus, Mid-Yellowstone, and Tongue River electric cooperatives.

Please attend to discuss the history of southern Montana G & T and history of Highwood generating station; use of the Chicken Little, Henny Penny scare tactics; conflict of interest issues; cost of power and need for a Highwood plant. Also on the agenda is an attempt to follow the money with requests for an independent audit of Southern Montana G & T and proof of a water right from the Missouri River.

We will request that managers of all the cooperatives be present. Attorney General Steve Bullock, State Auditor Monica Lindeen, Public Service Commissioner Brad Molnar, representatives from MDU, NorthWestern Energy and PPL have been asked to attend or send representatives.

Larry Luloff
Roberts