Article published Apr 29, 2008

Officials mixed after Highwood pullout

By RICHARD ECKE

Tribune Staff Writer

Officials from the city of Great Falls offered mixed views Monday on how the pullout of a large electric cooperative will affect the Highwood Generating Station project.

The city has more than $3 million tied up in the project, which would be built eight miles east of Great Falls.

"If you get 17 nonfatal blows, they just might add up to death," said Great Falls City Commissioner Mary Jolley, a consistent critic of the project. Jolley said she hopes the city will take the opportunity to divorce itself from the Highwood project, as the Yellowstone Valley co-op has done.

Not so fast, said Commissioner Bill Bronson, who is among the four other city commissioners who have supported the project.

Bronson said Monday he believes the key issue is how the co-op's departure will affect Wall Street's view of whether the project should be financed.

"In the end, I think that's really the key," Bronson said. "I don't know how the financial people look at something like that. They may conclude that it's significant or they may say that it isn't."

In addition, Electric City Power board member Robert Pancich, a former banker, said the Yellowstone group's action "may be a positive" if viable new partners followed.

"I guess I'd need to see the other players that would be coming in," Pancich said. "You may be better off with a more even cast of members in there."

Commissioner Bill Beecher said he would have preferred if Yellowstone had not pulled out of the project, since it "injects more uncertainty" into the venture.

"It certainly changes some of the dynamics," Beecher commented. "I don't think it cancels the project."

But Richard Liebert, chairman of Citizens for Clean Energy, a power plant opponent, used a naval analogy.

"Your main battle carrier just got torpedoed," Liebert said.

With the flagship out of action, that leaves the other smaller boats to float around and blow smoke, Liebert added. "I think it's time for an exit strategy for SME."

Liebert suggested SME consider alternative energy sources for its electricity needs.

Beecher and Bronson said they want to hear city staff's analysis of the pullout and what the city's options are. Coleen Balzarini, executive director of Electric City Power, the city's electric utility arm, could not be reached Monday, nor could City Manager Greg Doyon.

If the power-plant project fails, the city or its electric utility arm would be on the hook for at least $3 million, including $1.5 million the city borrowed from First Interstate Bank to pay for the plant's development costs. The city would lose that money if the project is scrubbed. City officials have said there's a chance the city General Fund might be used to repay some of that money.

In addition, the city and Southern Montana Electric Generation & Transmission Cooperative agreed earlier that the city would buy power through SME at a reduced rate, with the city issuing so-called "water credits" for the difference. If the coal plant is built, raw water used by the plant would gradually pay off the water credits. If there is no plant, however, Electric City Power would still owe that money to SME.

Balzarini has said the city could regain those water credit dollars, which the city estimated would reach a maximum of $1.64 million over the next few years, by raising rates to Electric City Power's customers.