STUART LEWIN'S NOTES FROM ELECTRIC CITY POWER, INC.(ECPI) BOARD MEETING 7-11-2006*

Copies given to City Commissioners at their public commission meeting on 7-12-2006 to make certain that they know and take responsibility for Coal Plant decisions and the fact that ECPI is forwarding questions and decisions to the City Council

[NOTE: On July 1, 2006, I sent each of the City Commissioners a list of questions that I had asked the Board of ECPI to answer during their meeting on June 12, 2006, when they told me that they would not listen to my comments nor answer my questions Board minutes from the June 12, 2006, said only: “ Several members of the public made comments to the Board.” ]

Present at ECPI Board meeting on 7-11-2006 were: City Manger John Lawton, Board members Randy Gray (former mayor), Dawn Willy (Benefis representative), George Golie (former state legislator and current union advocate), Chair Robert Pancich, city intern and minute taker Jordon Love. In the audience who spoke during public comment: Mary Jolly (running for state representative as republican in HD 22); Stuart Lewin, and Bill Zuccon, a retiree and a taxpayer whose family members trade energy futures in PA:

1. City Manager Lawton told Board member George Golie that the Agreement between PPL and Northwestern reported in the GF Tribune on July 6, 2006 meant that power that default customers (that's you and I as residents of GF) will be paying increased rates as high as $50/KWH (our current rate is in the $30’s). WHY would Manager Lawton be pleased with this increase for our residents? HE SURELY UNDERSTANDS that the more PENNSYLVANIA POWER AND LIGHT charges, the more GF can charge for energy from SME’s coal plant.

2. City Manager Lawton reported that SME recently informed the City that the power rate they are projecting from SME GF coal-fired electric generating plant would cost in the low forties/KWH. For those of us who have tried to determine what business plan SME has used to make this estimate, we find great risks in undetermined, hidden and unexplained costs of: coal, coal transport, a carbon tax, cost overruns in building the plant (highly likely since the $515M price tag to build the plant was at $1.50 gal gas ½ of what it is today), monitoring coal ash waste (CAW) and reclamation etc. One thing is certain, however, Manager Lawton does not care as much about what we residents pay for energy, as long as GF/SME can build the coal plant and get the Citizens of GF and MT to pay for it. Watch out for a wolf in sheep's clothing when City Manager Lawton says he wants the City to be the default supplier of power to GF residents.

*Regular Print is what happened at meeting. Italics are commentary I added after the meeting to explain the importance of the matters discussed.

3. Board chairman Robert Pancich said that the PSC had stopped Northwestern from developing a Gas Plant here that would have provided $60/kwh power when rates were at $30.00/kwh and this was good. When Stuart Lewin asked who would oversee the city’s rates from the coal plant and its energy portfolio, City Manager Lawton said no one. He said the GF City commissioners would decide.

4. City Manager Lawton admitted to Stuart Lewin that he wanted the city to become the default supplier to its residential customers. He believes that his association with SME has proved that the City of Great Falls can provide electricity at lower rates than market rates being charged by PPL; furthermore, he said that the city provides the lowest sewer and water rates in the state.

5. There is no basis for Lawton’s belief. SME had some low contracts to buy power from the Bonneville Power Administration, which it was willing to share with GF; when these end they will have nothing cheap to share and if we share in the building of the Coal plant we share in the economic risk of the cost of that power.

6. Board member Randy Gray said he would respond to the 11 questions he said Stuart Lewin had asked, but he tired during his first answer and again said that this board was simply advisor to the commissioners and that these questions should be presented to them, and if we did not like their answers the citizens should recall the Commissioners. Mary Jolly commented that she personally liked the commissioners and that there ought to be a better process to determine the public's input and will on the coal plant.

7. City Manager John Lawton told the Board that the EIS on the coal plant was prepared by an organization other than SME. Stuart Lewin told the Board that his review of the EIS to date and discussions other Citizens have had with those responsible for preparation of the EIS for the Department of Agriculture show that much of the critical information comes from SME. Stuart Lewin then suggested that the reason this is important is because, the City of Great Falls has never on its own determined the needs of this community, no inventory or meaningful discussion of alternate energy opportunities (wind, solar, hydro, conservation) for this community have been prepared even though the city could have had such a study done by professionals who are not looking out for SME’s interests.

8. City Commissioner Lawton responded that SME had already done a study of needs and opportunities for the city and another one was not needed. Stuart Lewin stated SME has different goals than GF has. Their customer base is in Eastern MT and Wyoming. They do not care what environmental degradation we have to live with to provide them with power. But our commissioners, city manager and our Power Board should care. In fact they are responsible under Montana’s Constitution to provide us with a “clean and healthful environment.”

9. Mary Jolly wanted to know why the ECPI Board meeting’s minutes were incomplete and poorly kept; why the citizens had not been permitted to vote on this project before 1.5 million in development bonds had been let by the city. Golie said that the MT Attorney General’s opinion requiring a vote of the citizens only applied to a gas plant not a coal plant.

10. City Manager John Lawton told the Board that only one wind developer had contacted the city about using the coal plant’s power to firm their wind project. The city needs to check out whether a coal plant can be used for these purposes. It is my understanding that a coal plant cannot be easily turned on or off so that unlike a gas plant or hydropower a coal plant is really not practical for firming wind; rather it is used for base lode and if you do not have contracts for base load you can have the real problem of what to do with the energy you are producing.

11. BILL ZUCCONI, the final person to address the Board said that the city was providing risk capital in building the coal plant and that as a taxpayer he along with our neighbors should have been given the opportunity to vote on whether they wanted to take on this risk and be in the power business. But that this was never done. He also wanted to know what had been spent so far on plant development in addition to the 1.5 million. City Manager Lawton said that there was a settlement with Northwestern on the defaulting on their contract with the city and that this money instead of remaining in the city's reserve fund has been used for coal plant development with SME. The last question pointed out that perhaps taxes would NOT have needed to be raised last year if the Northwestern settlement had remained in the City’s reserve fund was the reply. So already Citizens’ taxes are going up to pay for the coal plant.

12. Board chairman Robert Pancich admitted to Stuart Lewin that when he supported "cap and trade" at state DEQ's mercury rule hearing in GF on May 31, 2006, he did not know what that meant. He thought that he was saying that he wanted federal mercury standards and that he did not want the state to set lower standards.

“Cap and trade of mercury emissions means that each state is given an

predetermined allocation of mercury. EPA gave Montana a limit of 298 pounds of mercury that it can emit each year by 2018. The State then gives each plant an annual amount of mercury that it is allowed. Each plant must either limit its emissions to it allocation or it must buy credits from plants elsewhere to say it has reached that amount. Montana has not divided up the mercury emissions allowances yet. It is proposing to do that in October of each year starting in October of 2009 for the following year.

But since the Colstrip plants are so much larger than anything else in

Montana, DEQ is expecting that they will need most of the state's mercury

allocations. DEQ anticipates that with an emission limit for all plants of 0.9 lbs/Tbtu that existing plants will use about 205 pounds of Montanan's 298 pound allotment annually. That leaves about 93 pounds for new plants. SME will not have a problem fitting in under the 93 pounds of allocation, especially now that Roundup is saying that it is not going to build an electricity generating plant but instead wants to build a coal-to-liquids plant (this rule does not cover coal-to-liquids - only electricity generating plants).

The argument that somehow anything other than the federal mercury rule that doesn't require any real reductions in mercury emissions until 2018, will somehow stifle development of this plant is nothing short of bogus

blackmail. Furthermore, this plant keeps saying that it is going to be

good at controlling mercury. If that is the case, it has NOTHING to worry

about with a good mercury rule.

There are many reasons to believe that there will be enough mercury

credit for all existing and new plants. In fact, if we move to IGCC we can have up to 16 more power plants in Montana and still comply with the federal cap of 298 pounds.

I think it is clear that the city's power authority does not understand cap and trade. First, there will not be a cap and trade program for this potent neurotoxin once the litigation is resolved. 15 states are suing EPA. That is not done often. EPA's inspector general said the rule is probably illegal. Anyone who understands the Clean Air Act knows that EPA is just buying the industry time and time is money in that world. There will be firm limits on power plants in the future. The only question is do we want to wait for the feds to finally get it right, or do it right the first time and protect public health while the litigation is being resolved.

IN addition, so many states are opting out of this cap-and-trade program

that it is likely there will not be enough credits to have a program. That is one of the reasons that EPA is starting to strong arm states that are developing their own programs.

That aside, Montana DEQ has done the calculation based upon a 0.9 lbs/Tbtu emission rate for each plant in Montana. It will allocate those 298 pounds of credit on a first come first served basis and currently there is enough credit for SME even if is built Roundup. But no plant will be allocated credits until it is operational. Since SME is further along in the process than anyone else, it will be up and operating before other plants (barring some other delay).

But with a trading system, companies only have to show on paper that the

have either reduced their emissions or purchased enough credits from other plants that have reduced their emissions. It's a paper pushing exercise. Someone, somewhere will reduce their emissions beyond what they have been allocated. They will then sell those extra credits on the market. Those companies that don't reduce their emissions to their allocated amount will have to purchase those credits in the marketplace in order to demonstrate that someone reduced their emissions enough for both of the companies.

Attached is a really good article from the Journal of the American Medical Association on the public health groups that sued EPA over this rule. It helps explain it and helps demonstrate the public health impacts from this wretched rule.” Ann Hedges, MEIC 7/12/2006