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Published on Friday, September 21, 2007.
Last modified on 9/21/2007 at 8:10 am

Highwood plant has objectors within co-op membership

By LINDA HALSTEAD-ACHARYA
Of The Gazette Staff

As three Montana cities - Missoula, Helena and Bozeman - turn down a chance to plug into the Highwood Generating Station, some co-op members in south-central Montana wish they could do the same.

"Since the electric cooperative owns the poles and wires and infrastructure that delivers power to our homes and ranches, we are not free to choose whether or not we want to participate," said Dot Gallager, a resident of Columbus and member of the Beartooth Electric Co-op.

The Highwood Generating Station is proposed to be built in Great Falls. But the major share of its energy will power the 35,000 meters of the Yellowstone Valley Electric Co-op, the Beartooth Electric Co-op, the Fergus Electric Co-op, the Mid Yellowstone Electric Co-op and the Tongue River Electric Co-op.

Gallager questions the wisdom of building an estimated $700 million plant for so few customers. Calculating from rough estimates, she figures the facility alone will cost each household more than $22,000 - not counting the cost of power once the plant comes online.

"We are captive ratepayers," she said.

Dave Grimland, another Beartooth member and resident of Columbus, views Highwood as a financial white elephant. He and his wife, Kathleen Ralph, say the coal-fired plant could soon be outdated - perhaps even before it's completed. They commend the co-op's board of directors for dealing with a projected electricity shortfall early, but they say the energy picture has changed radically since 2004, when the Highwood proposal was born.

With global warming now a high-profile issue, they foresee policy changes that will soon require carbon capture technology. If a plant has to be built, they favor the technology known as "integrated coal gasification combined cycle" over the proposed "coal-fired fluidized bed boiler." They admit that IGCC technology may be several years off, but they think its benefits - the potential to capture carbon, a higher thermal yield and half as much need for water - are worth waiting for.

"We're entering a period of enormous change, both technologically and politically," Grimland said. "This whole carbon issue just blew up. We're in a place now the directors could not have predicted earlier."

Kent Harris, an Absarokee resident and member of Beartooth, tried to analyze the financial implications between the two technologies but ended up mired by elusive variables. The likelihood of greenhouse gas legislation and possible "grandfather" clauses would have significant implications that would be difficult to anticipate, he said.

Co-op officials, however, counter both financial and technological concerns.

Tim Gregori is CEO and manager of Southern Montana Electric, the Billings-based co-op that has headed up the Highwood proposal. First, he explains, the co-ops of south-central Montana have no choice but to take action. The energy they receive from the Bonneville Power Administration phases out between 2008 and 2011, forcing them to find new sources for 80 percent of their electricity.

Some of Montana's rural electric cooperatives signed on with other energy sources, but the five co-ops that joined forces with SME decided to build their own generating facility.

Gregori likens building a power plant to buying a house. Yes, there's the cost of construction, but in the end the co-ops will have their own facility and their own source of power at a relatively constant price.

But even "relative" is a relative word. A study by RW Beck, a firm hired by Great Falls to conduct an independent analysis of the Highwood project, pinpoints "a broad range of uncertainty" regarding the cost of coal and rail rates. (As proposed, the Highwood Generating Station will be located in Great Falls because of its need for large quantities of water, which will come from the Missouri River. But the plant will burn coal shipped via rail from southeastern Montana.)

Regarding technology, SME Vice President John Prinkki said board members are continually re-evaluating the proposal and assessing cutting-edge technology through their participation in organizations like the Big Sky Carbon Sequestration Partnership.

"If you wait for technology, you'd never do anything," he said. "But if that (carbon capture) is something we need to do, we want to be a demonstration project."

According to Prinkki and Gregori, the proposed plant would be one of the cleanest in the country. As planned now, however, it would not capture carbon. But promoters say they are open to promising new technologies so long as they are economically and technologically feasible.

One key factor that sets Highwood apart is the unique status of rural cooperatives. Introduced in 1935 to bring electricity to the hinterlands, rural cooperatives are nonprofit organizations owned by members and run by member-elected directors. In Montana, the Public Service Commission has no authority to review or regulate the rural cooperatives. Nor are the cooperatives required, as is NorthWestern Energy, to designate funding for energy conservation.

Gallager and Ralph take issue with both points. Gallager would prefer having PSC oversight, particularly in light of complex proposals like Highwood; and Ralph would like to see energy conservation as part of the co-op's mission.

"There are no tax write-offs for conservation measures," Ralph said. "I think that's worthwhile for co-ops to do. The rates may go up, but the costs (energy bill) may go down if you conserve. In the long run, everybody benefits."

Energy conservation, and ways to promote it, will be discussed at the upcoming annual meeting of the Beartooth Co-op, said Prinkki, who also serves as president of Beartooth.

Members will be asked if they want to support subsidies for fellow members who invest in energy conservation measures. Or they may prefer to promote conservation by educating and encouraging fellow members to take the initiative on their own, he said.

Beartooth Electric had also investigated "smart metering," through which the co-op could promote energy consumption during off-peak hours. But Prinkki said the system upgrade, estimated at $600,000, is beyond the co-op's finances.

Meanwhile, in spite of the cities' rejection of Highwood power, Gregori said the project continues to move forward.

"The size of Highwood Station can be adjusted accordingly," he said, noting that the initial proposal for a 250-megawatt facility could be reduced to a 215-megawatt facility.

Currently, the Highwood proposal awaits decisions on two lawsuits. More importantly, however, the plant awaits a decision on a loan request from the national Rural Electric Service.

Arleen Boyd, a Fishtail resident and member of the Beartooth Co-op, questions why Highwood should even be considered for government loans. Boyd reasons that much of the projected increase in demand for electricity comes from new subdivisions and expensive trophy homes - and not the family farms and ranches that were the original mission of rural cooperatives. She also takes issue with co-ops nationwide, which have pressured Congress to exempt themselves from any clean energy requirements that may be instituted.

"And they were lobbying to continue to receive cheap government loans to build their outdated coal-fired plants like the one in Great Falls," she said.

But the success of Highwood is contingent on the RES loan. Gregori said Highwood is currently first in line for review and he anticipates a decision by the end of the year.

Supporters like Prinkki and Gregori, who have worked on the project for several years, are eager to see it come to fruition.

"In six months, we'll be exposed to the open market," Prinkki said. "Every month we're exposed to the open market would probably cost Beartooth customers about $50,000. You're talking serious money - $600,000 annually."

Gregori said the passage of time has only given him a greater understanding of the benefits associated with a Montana project that will provide energy for and by Montanans.

"The need for Highwood only continues to grow," he said.

Ralph and Grimland acknowledge the high cost of waiting, but they believe the cost to members will be much greater if they end up saddled with an outdated plant.

"The idea of being independent is very appealing," Ralph said. "I can see why they went that way in the beginning. But I am very concerned at the costs of Highwood, which keep getting higher. I am concerned about the debts that Beartooth is incurring, and I am very concerned about the pollution aspects. Since we don't have PSC oversights, we as members need to be informed."