Highwood plant dodges bullet with ruling

 

A federal agency has ruled against Montgomery Energy in a dispute that could have hurt plans for a coal-fired power plant east of Great Falls if it went the other way.

 

The Federal Energy Regulatory Commission on Friday ruled against Montgomery Energy, which wanted FERC to place the company first in line for access to area transmission lines, ahead of the Southern Montana Electric Generation & Transmission Cooperative and other developers. SME wants to build the coal-fired Highwood Generating Station eight miles east of Great Falls.

Montgomery has plans to build a natural gas-fired power plant north of Great Falls.

"We see no persuasive reason to allow Montgomery to leapfrog ahead of those other projects," FERC said in its ruling.

The proposed Highwood power plant is first in line to use much of the area's remaining transmission capacity, but Montgomery Energy argued it was entitled to the top spot. A ruling in favor of Montgomery Energy could have jolted plans for the coal-fired power plant, or increased the project's estimated $800 million cost.

Tim Gregori, general manager of SME, said Monday that the ruling was consistent with past FERC decisions, adding it would have been unusual for the commission to side with Montgomery Energy under the circumstances.

"It seemed that the issue was pretty straightforward when they (Montgomery) filed their request," the Billings-based Gregori said in a telephone interview.

He said SME would have challenged a FERC ruling to leapfrog Montgomery ahead of the proposed coal-fired power plant.

According to the FERC ruling, Montgomery Energy agreed to purchase a natural gas-fired plant project and property north of Great Falls from NorthWestern Energy in August 2006. NorthWestern had once planned, but later abandoned, the proposed Montana Megawatts project, which at one time held the top spot in the area's energy transmission queue.

FERC noted Montgomery Energy declined to purchase Montana Megawatts' place in line in the transmission queue, good for 167 megawatts of power. Montgomery Energy plans to build a 277-megawatt plant, so it submitted a new interconnection request, giving up its claim to Montana Megawatts' place in line, the federal agency said.

"Montgomery must now bear the consequences of its decisions," the commission said.

In addition, the ruling said Montgomery Energy officials had apparently relied "upon the oral statements of a NorthWestern employee that a new interconnection request was likely to lead to no more than $15 million in costs." After conducting studies, however, NorthWestern told Montgomery it would need to pay $146.7 million to connect its power plant to NorthWestern's transmission system, because of the lack of additional transmission lines.

After receiving that cost estimate, Montgomery officials asked FERC in September to step in and place the company back at the top of the queue.

Taylor Cheek, managing director of business development for Texas-based Montgomery Energy, could not be reached for comment Monday on whether the company still plans to proceed with the project.

Cascade County Commissioner Peggy Beltrone, a proponent of wind-energy development in central Montana, said she had not yet talked to Montgomery Energy officials as of Monday afternoon, and did not know whether the company considers the decision a major setback.

"If this FERC ruling jeopardizes the project, I would naturally be disappointed," Beltrone said. She added that there may be alternatives to the project, but she was looking forward to the plant boosting Cascade County's tax base.

State Public Service Commission Chairman Greg Jergeson said Monday that there is a question whether Montgomery Energy "could even make a decision to go forward" facing such hefty costs. Jergeson said the gas plant would not be a base-load plant, which cranks out electricity on a regular basis, but would specialize in peaking and firming power to complement proposed wind farms in the area. Peaking and firming power is provided during high usage times and when the wind isn't blowing strong enough to provide the needed power.

Jergeson said he was not surprised by FERC's decision, given its adherence to the idea that positions in transmission queues are handled on a first-come, first-served basis. But he said officials are discussing whether FERC needs to reform the queue system.

"Nationally, this has become an enormous problem," Jergeson said. One concern is that projects that could be built in a short amount of time, such as the Montgomery Energy plant, may take a back seat to a project such as the Highwood Generating Station, which wouldn't be online until 2012 or 2013 at the earliest, he said.

"I think there are real questions now about whether Highwood has any chances of going forward," Jergeson added, citing the departure of SME's largest single electric co-op member from the project, among other factors.

Gregori said Jergeson is entitled to his opinion, but added the commissioner might want to obtain more detailed information about the proposed coal-fired plant "than what he was able to glean from the newspaper."

Gregori added that SME's project remains on track, although he said a date for when the plant would start producing power will not be set "until we have all these issues resolved."

Another issue facing SME is that the proposed plant's small particulate emissions are being examined by the state Board of Environmental Review, Gregori noted.

He added that the project has faced a variety of hurdles, some of which it is still contending with.

"We just need to deal with them one at a time," Gregori said.

Jergeson said he believes that reforming FERC's view of the queue system to get projects moving more quickly makes sense.

"I think they really do need to adopt some 'use it or lose it' (policy)," Jergeson said.

Gregori strongly disagreed with altering FERC's approach, noting that, at one time, SME's proposed plant sat in the queue behind Montana Megawatts, waiting its turn. He said FERC needs to provide energy developers with due process and "a level of certainty," rather than create "some arbitrary process" in the middle of the game.

As for transmission, questions remain over how costly new transmission lines should be paid for, Jergeson added.

"Who gets to pay for the new transmission?" Jergeson asked. "It's not just unique to Montana."

Beltrone said that more transmission lines are sorely needed in Central Montana to support new wind energy projects.

"Developers need three and four times as much as the entire line's capacity to carry the wind energy now under development to load centers," Beltrone said.

Reach Tribune Staff Writer Richard Ecke at recke@greatfallstribune.com, or at 406-791-1467 or 800-438-6600