Article published Apr 8, 2008

Gregori believes Highwood Station will get funding

By RICHARD ECKE

Tribune Staff Writer

Rising costs and attempts to obtain financing are challenges for the proposed coal-fired Highwood Generating Station, an official acknowledged Monday.

But Tim Gregori, general manager of the Southern Montana Electric Generation & Transmission Cooperative, said costs are rising for everyone, not just prospective power-plant builders. He said current cost estimates to build the plant are $790 million to $800 million.

Gregori spoke to Electric City Power board members Monday at a meeting that drew about 20 people. After the session, Gregori said he could see no reason the project would not obtain financing from a private lender, as long as the project is able to provide technical details to satisfy a prospective lender's requirements.

During the meeting, Gregori said SME had discussed the possibility of purchasing wind power from Invenergy, a Chicago-based firm that sells wind power to NorthWestern Energy produced at Judith Gap for roughly $45 per megawatt hour.

Gregori showed figures from a PowerPoint presentation Monday that electricity created by Highwood Generating Station, a coal-fired plant, would cost less than $55 per megawatt hour. He also said a rough estimate for the cost of wind power currently in Montana would be roughly $70 per megawatt hour, which he said was "far north" of coal plant-produced power.

"Wind is not the most economic resource," Gregori said.

Gregori also said he believes the project failed to obtain financing from the federal Rural Utilities Service this year because such a loan "primarily has been precluded by Congress."

Speakers at the meeting cited various rising prices to bolster their own positions.

Plant critic Paul Stephens said costs of raw coal are rising, while "we have the best wind environment in the country."

He urged the city of Great Falls to cut its connections to SME. "Figure an exit strategy and get the hell out of this," Stephens said.

Gregori said prices for natural gas-produced electricity have soared. Gas is often used in conjunction with wind power.

Meanwhile, Coleen Balzarini, city fiscal officer, said the developer is talking to bond rating agencies in its quest for private financing.

"The rating agency asked for 21 different items," Balzarini said.

Gregori argued the Highwood plant remains a viable solution for members who will lose their supply of cheap Bonneville Power Administration electricity in phases beginning July 1. The Highwood plant would use Montana coal to create public power controlled by Montanans, he said.

Gregori also contended the coal-fired plant is first in line in a queue to use transmission lines to send the power east to its rural cooperative members. Montgomery Energy wants to build a natural gas-fired power plant north of Great Falls, and has asked the Federal Energy Regulatory Commission to certify the gas-fired project is actually first in line to use the transmission lines.

As for the cost to build the Highwood plant, Gregori said even "if we get a preliminary commitment from a lender," the developers won't know a final cost until the loan is closed. He said the same is true with a homeowner building a new house.

City Commissioner Mary Jolley, who in an earlier interview theorized the Highwood project is "dead," expressed concern the Electric City Power board does not even provide minutes of its meetings to the City Commission.

"We are not in charge of our energy," Jolley said. The city is losing money on its electricity efforts, she said.

"I don't think the (power) board is up to the task," Jolley added.

Also at the meeting, board members agreed to give Balzarini authority to try to reach a deal to provide power to a large, 5-megawatt customer from the Billings area. She said there's a chance the customer at some point would be interested in expanding its business to include Great Falls.