Managers Column by Terry Holzer

Manager’s Column by Terry Holzer

Over the past several years, your board of trustees and general manager have provided Informational updates about the proposed coal-fired power plant near Great Falls. The project owner is Southern Montana Electric Generation and Transmission Cooperative (SMEG&T), which is an entity that our cooperative helped form in 2003 for the purpose of providing power supply to Yellowstone Valley Electric Cooperative, four other electric cooperatives and the City of Great Falls. When the plans to construct a 250- megawatt coal-fired power plant were first formulated four years ago, owning our own power supply through SMEG&T seemed like the best option to control future power supply costs. Unfortunately, there are some people in Montana who are determined to prevent any new coal-fired power plants being built in our state. Several environmental

groups have filed legal action against SMEG&T to stop the Highwood Generating project. The air quality permit has been challenged on the basis of carbon dioxide and particulate emissions. The proposed

zoning change in Cascade County, which would allow for the construction of the Highwood Generating project, is also being challenged. The Board of Environmental Review is currently conducting hearings on SMEG&T’s air quality permit. Some of the same Montana environmental groups have also filed a lawsuit against the Rural Utilities Services to stop the lending of money to electric cooperatives that want to build a coal-fired power plant in Montana. Congress has also held up appropriating the necessary

funding to the Rural Utilities Services for power plant construction, which has delayed any financing opportunities by as much as two years. As a

result, SMEG&T has opted to seek financing from commercial banking institutions. In addition to the legal challenges against SMEG&T power plant project, recent concerns about climate change and global demand for power plant construction materials have significantly increased the cost of the Highwood Generating project. This has resulted in the estimated cost of the power plant project to increase from $456 million to around $800 million. When the cost of capturing and storing carbon dioxide is added in, the price of the power plant could exceed $1 billion.

The price escalation of the power plant project over the past four years,

along with the legal and financial challenges, raises considerable concerns.

Another serious issue involves the long-term liabilities associated with the

transportation and the permanent storage of carbon dioxide, which presents a significant financial risk to any utility that builds a coal-fired power plant in light of today’s climate change debate. Some of the nation’s largest electric utilities have recently announced they are stopping plans to build coal-fired power plants because of the unknown

costs, the legal liability, and the political uncertainty involved with the capture and storage of carbon dioxide. These utilities, which have considerable financial resources at their disposal, have determined that the financial risk to their customers is far too great. The year 2007 marked the highest number of coal-fired power plants to be cancelled in a single year. Until such time that carbon capture technology advances to a point where it is commercially viable and affordable, utilities will be hesitant to be the first to take on the financial risk of constructing a coal-fired power plant that requires the installation of this emerging technology. The board of trustees and management team at Yellowstone Valley Electric Cooperative have been constantly monitoring and engaged in these ever-changing events. We will continue to analyze the best power supply options that may be available to our Cooperative and we are having candid discussions with our fellow member cooperatives of SMEG&T about the construction of the Highwood Generating project. We will continue to keep you apprised of events as they unfold.