Southern Montana Electric Files for Bankruptcy, Raises Rates

Southern Montana Electric (SME) Generation and Transmission Cooperative Board, a wholesale electric company made up of five rural electric co-ops in Central and Southern Montana, has filed for bankruptcy citing ‘acute cash flow problems’ as the reason. At the same time, three members of the board voted to raise electricity rates by 20%. This has been the fourth increase since December. However, some other board members claim they were kept in the dark. Dave Kelsey, an SME board member from the Yellowstone Valley Electric Cooperative said, “We had no clue this bankruptcy thing was coming. We should have been alerted to it.”

The five cooperatives that make up Southern Montana Electric Generation and Transmission are Yellowstone Valley in Huntley, Beartooth in Red Lodge, Fergus in Lewistown, Tongue River in Ashland and Mid-Yellowstone in Hysham. Among them, Yellowstone Valley and Electric City Power of Great Falls has sued to terminate their association with SME but the bankruptcy proceedings will take precedence over the lawsuits.

On the other hand, the bankruptcy filing also put a stop to SME’s efforts to apply for a loan of up to $300 million to complete the phase two of the Highwood Generating Station. This project alone cost co-op members millions of dollars because it was changed from a coal-fired plant to a natural gas-fired plant.

It appears the voting to file for bankruptcy and raise the rates was carried out under somewhat acrimonious conditions. The five member board voted 3 to 2 to include a new board member, Arleen Boyd representing the Beartooth co-op. As a result, the board members from Yellowstone Valley and Electric City Power walked out in protest. After that, the remaining 3 board members voted for bankruptcy and upping the rates. The bankruptcy filing was done last Friday.

Great Falls City Commisioner, Bob Jones commented that the vote may have lacked the necessary quorum. He said, “You’d think something of this magnitude, they would have called a special meeting. It wasn’t on the agenda. Everything is secretive.” But board attorney Jon Doak advised the remaining members that they had a quorum because the meeting had started with five members.

According to bankruptcy papers, SME owes nearly $7.6 million to PPL EnergyPlus and $1.16 million to the Bonneville Power Administration. It also lists a debt of $4.85 million in credit lines, $4.29 million in construction costs, nearly $1 million in engineering costs and more than $330,000 in legal fees.

Yellowstone Valley general manager Terry Holzer contends that SME bought too much power from PPL such that it had to sell the excess into the market, resulting a loss of about $9 million from April through August.

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