May 17, 2008

City to re-examine role in Highwood plant

By RICHARD ECKE
Tribune Staff Writer

City of Great Falls officials are taking a new look at bankrolling development of the proposed coal-fired Highwood Generating Station.

The approximately $800 million power plant would be built eight miles east of Great Falls along Salem Road, but it's been hit this year by two major setbacks.

In one development, the federal Rural Utilities Service in February refused to approve financing for the project, which was requested by five Montana rural electric cooperatives. The co-ops belong to the umbrella group Southern Montana Electric Generation & Transmission Cooperative.

Last month, SME's largest member, Yellowstone Valley Electric, left SME after it either quit the group or was kicked out after its officials were openly skeptical about the project. Officials with Yellowstone Valley and SME differ on why the rural co-op left the group.

New Great Falls City Manager Greg Doyon said this week he wants to know the real impact of the federal agency's lending refusal and the departure of Yellowstone Valley from SME.

The city of Great Falls staunchly supported the project when former City Manager John Lawton held the post. The city planned to hold a 15 percent to 25 percent share of the project. Great Falls already has invested more than $3 million in the venture.

At this point, city officials are wondering whether they should continue to stay the course or jump ship as an active supporter of the power plant's development.

Doyon said he simply wants to take "a fresh look" at the city's involvement in the power plant project.

He said his primary concern is making sure the city of Great Falls has an adequate flow of information from SME about the project.

Doyon was in Billings on Thursday and Friday for monthly SME meetings, and he was expecting some type of response to the recent setbacks from SME officials. There's a perception on the part of some people that not enough information is flowing from SME in Billings to Great Falls on what's going on with the Highwood plant project, he said previously.

Doyon could not be reached for comment late Friday for reaction from the energy meetings in Billings.

SME officials last month moved to create a new organization, minus the Yellowstone group, which would develop the plant. SME also is looking for new partners to accept power from the plant.

Terry Holzer, Yellowstone Valley Electric's manager, attended a Thursday SME board meeting. He said his group still hopes to be able to recoup its nearly $5 million investment in the project.

"I think we're optimistic that we can arrive at a resolution here," Holzer said Friday. "We hope they get it built successfully."

He added that Yellowstone Valley has a chance to be reimbursed for its investment if the Great Falls plant gets built.

As for Doyon, he wants some dollars and cents information about the project, including whether the city will be asked to make additional financial contributions if it decides to affiliate with the new organization.

"I'm not clear on what kind of additional investment would be needed," Doyon said.

He added he is not sure the city or its utility arm, Electric City Power, has the means to put additional money into the power plant.

City officials also want to know what would happen to the city's initial investment if it opts out of the new group.

City commissioners previously have strongly supported the project, but now say it makes sense to take another look at the proposed power plant at this juncture.

"It's just prudence," City Commissioner Bill Bronson said. "Some of the circumstances are changing."

Doyon said he is not sure whether he will stay as the point man for the city on the power plant, or if someone from Electric City Power or another city staff member should take that position.

He said city staff members are working on an analysis of the situation, and might present their thoughts on the power plant as quickly as next week.

Power plant critic Richard Liebert, chairman of Citizens for Clean Energy, said this week that he believes it is the right time for the city to cut its losses and sever ties to the project.

"How much more can the city put into this?" Liebert asked. "I think they need to get all the information on the table and then make a prudent decision."

City Commissioner Mary Jolley, an outspoken foe of the city's involvement in the plant, said she thinks other commissioners are willing to hear the city's options following the setbacks to the Highwood project. Jolley said she doesn't want the city "throwing good money after bad."

Bronson, who has strongly supported the power plant, said the arrival of Doyon is one factor in wanting to take a new look, given the manager's level of experience. And Yellowstone Valley's departure from the picture is another.

Private financing remains an option for the plant, Bronson said.

"(Investors) want to make sure that the project is going to pencil out," Bronson added.

He said he expects the City Commission to vote later on whether to join the new development corporation being formed by SME.