Article published Apr 28, 2008

Major player says it's pulling out of Highwood Generating Station project

The largest member of Southern Montana Electric Generation and Transmission, a coalition of rural electric utilities proposing to build a coal-fired power plant east of Great Falls, wants out.

“We’ve requested to be removed from the Highwood project,” said Terry Holzer, general manager of Yellowstone Valley.

He said Yellowstone has a difference of opinion with the other members of SME as to the “viability of the project,” Holzer said.

The cooperative, which makes up roughly 40 percent share of the power plant, is based in Huntley.

It notified its some 14,000 members in Big Horn, Carbon, Musselshell, Stillwater, Treasure and Yellowstone counties April 24 that it has concerns about the cost of financing the power plant.

The letter said the rising cost could increase the price of power to the point it “could be cost-prohibitive.”

SME CEO Tim Gregori said Yellowstone Valley requested that the cooperative be “insulated” from any further development costs related to building Highwood Station.

The SME board of directors voted that, as of May 1, the cooperative will no longer responsible for further development costs. A separate legal entity was created, from an accounting standpoint, “to demonstrate the insulation,” Gregori said.
He said SME has other customers in Montana who have expressed interest in purchasing power from Highwood.

“We really don’t see this as a fatal flaw in the project,” Gregori said. “We have a member of the project who had a different appetite for risk …. "

He said the four other rural cooperatives that make up the project and the utility arm of Great Falls remain firmly behind building thet plant.

The original cost estimate of the 250-megawatt power was $450 million. The most recent estimate is $790 million. SME originally sought low-interest financing from the USDA Rural Utilities Service, but that agency announced earlier this year that it no longer would be financing new-generation facilities.

Gregori said efforts to get financing are continuing, but could be affected by a decision last week by the Montana Board of Environmental review that the state Department of Environmental Quality and SME need to do more study of fine particulate emissions.

Anne Hedges of the Montana Environmental Information Center, which is appealing SME’s air quality permit for the Highwood project said, “The house of cards is starting to fall.”