Lawmakers Seek More Transparency for Power Co-ops

By Beacon Staff

BILLINGS – Members of an interim legislative committee said Tuesday that they want to increase transparency within Montana’s rural electric cooperatives after one went bankrupt following the construction of a new power plant.

Sen. Alan Olson, who chairs the Energy and Telecommunications Interim Committee, said the intent is to prevent a recurrence of problems seen at Southern Montana Electric Generation and Transmission Cooperative.

The Billings-based cooperative filed for Chapter 11 bankruptcy protection in October after taking out $85 million in loans to build the Highwood natural gas-fired power plant near Great Falls. The plant has since been seldom used.

Other cooperatives that were members of Southern Montana say they were denied access to information that would have revealed the plant’s financial pitfalls.

“No more backroom deals,” said Olson, a Republican from Roundup. “You don’t take and pledge all of your members’ assets in a project without letting everybody know what’s going on. They definitely overstepped their bounds.”

Legislation being crafted by Olson’s committee would require a two-thirds vote of member co-ops before they take on debt to finance some power generation proposals. Each of those member co-ops would in turn need backing from two-thirds of their board members.

The draft legislation also would allow power distribution co-ops to conduct their own studies on rate impacts from the construction of new power projects. Costs for those studies would be shared by the power generation co-ops that proposed the projects.

Southern Montana provides wholesale electricity to five rural electric co-ops and the city of Great Falls.

Attorneys for Great Falls filed a lawsuit Tuesday contending that Southern Montana breached its fiduciary duties to the city in its pursuit of the new power plant. The suit also claims Southern Montana representatives undermined the city’s electric utility by establishing a separate company, Independent Electricity Supply Service, Inc., that sold power at prices lower than the city was able to offer.

Southern Montana’s former general manager, Tim Gregori, has blamed the bankruptcy on unfavorable contracts, missed payments and lost customers — not the new power plant.

Members of the co-op have rejected those claims and pinned blame on Gregori and others who built the 40 megawatt gas plant, after shelving plans to build a more expensive 250-megawatt coal-fired plant.

The interim committee’s transparency proposal was supported by the Montana Electric Cooperatives’ Association, which represents 25 Montana cooperatives serving a combined 400,000 people. Southern Montana is not a member.

One of the association’s lobbyists, Douglas Hardy with Central Montana Electric Power Cooperative in Great Falls, said the situation with Southern Montana was unique and his group is opposed to additional regulations. Nevertheless, Hardy said the association supported the proposal from Olson’s committee because of what happened at Southern Montana.

“Typically the co-ops are transparent — more transparent than Southern,” Hardy said. “The only reason we’re supporting this is because of what happened there. We can’t ignore what happened.”

Also backing the bid for more transparency were representatives of one of Southern Montana’s member co-ops, Beartooth Electric of Red Lodge.

But Beartooth board members at Tuesday’s committee meeting said the requirement for a two-thirds majority vote on financing proposals would not go far enough to protect the co-op’s interests. They said unanimous backing should be required.

“We could still be dragged into another Highwood simply because a majority of the board voted for it,” said Beartooth trustee Richard Nolan said.

Olson’s committee will take up the co-op transparency proposal again in September, with plans to introduce it when the Legislature reconvenes next year.