Plan to pool BPA power sounds alarm bells

A plan for the Flathead Electric Cooperative to join an interstate group of electrical utilities has several past and present Co-op officials alarmed about losing access to low-cost Bonneville Power Administration power.

In a March 11 letter to the Hungry Horse News, Francis Rosse, the past president of the Co-op's board of trustees, warned that the current board is considering joining Portland-based PNGC Power. The utility group has 16 members in Montana, Idaho, Washington, Oregon, Utah, Nevada and Wyoming.

Rosse said it will cost the Co-op from $8 million to $14 million to join "at a time when we are already facing a rate increase" and when the Co-op "is borrowing money to meet their current needs."

An "even more scarier scenario," Rosse said, is that the Co-op would turn over its BPA allocation of low-cost hydropower. Rosse was the board president the last time that happened — the Co-op gave up half its BPA power supply during its acquisition of Pacific Power & Light's power distribution assets in Montana.

As a result, the Co-op got saddled with high fixed-rates for five years as it paid PacifiCorp up to $43 per megawatt-hour for half the Co-op's needs — about $20 above what it had been paying. Getting that BPA power allocation back was not easy, Rosse said.

"We were facing huge rate hikes, but with the help of our legislators and the good graces of BPA, (the Co-op) was able to get our allocation back," he said.

Rosse also expressed concern that the Co-op "would have a minimal voice" once it joined PNGC, "even though (the Co-op) would contribute by far the most money and the largest share of BPA hydropower."

According to the PNGC Power Web site, the Co-op is by far larger than all 16 of its members in four categories — number of customers, annual peak load, miles of distribution lines and service territory. Lincoln Electric Cooperative, in Montana, is the newest member of the utility cooperative.

Jay Downen, Whitefish's representative on the Co-op board, said his phone "has been ringing off the hook" ever since Rosse's letter was published. Downen said he never would vote to give up the BPA allocation unless the Co-op members first had a chance to vote on the issue.

Downen is supported by state law, MCA 35-18-317, which says that a cooperative may not "encumber" any substantial portion of its property — by selling, mortgaging, leasing or otherwise — unless the encumbrance is approved by two-thirds of the cooperative's members. In this case, the encumbrance is the giving away of the BPA power allocation to a utility group where the Co-op would have one vote out of 17.

The PNGC proposal will be tested at the Co-op's annual membership meeting on Saturday 'see sidebar). The board of trustees vote in favor of the plan was close, and while the benefits of pooling resources through PNGC may exist, many members have not forgotten the impacts of the PacifiCorp deal and the 2000-2001 West Coast energy crisis.

Members can also look to the near future for power problems. The Co-op currently gets nearly all its power from the BPA, but beginning in 2011, the amount of low-cost power available from BPA will be capped and the Co-op will become responsible for finding energy sources to meet all its load growth.

The Co-op's methane-powered electric plant at the Flathead Valley landfill, the first in Montana, providing power for hundreds of homes since 2009, is one example. The Co-op is also investigating geothermal energy in Hot Springs, biomass, hydro, wind and other renewable energy projects. Efficiency is also important — the Co-op has expanded its residential Energy Fix program to provide free home audits for electrically-heated homes.

While the current recession continues to challenge the Flathead Valley, the Co-op says it "continues its objective of 'striking a balance' between finding new energy sources and keeping rates affordable." When BPA raised wholesale power rates last October, the Co-op's board elected to defer that increase until this spring to help its members get through the winter.

The Co-op spent about $42.6 million purchasing power last year, up about 9 percent over 2008 and accounting for about 48 percent of the Co-op's budget. Power sales to members reached $86.5 million last year, about 10 percent higher than in 2008.

More than $9 million is spent on operations and maintenance on the Co-op's 29 substations and 3,456 miles of power lines spread across more than 8,800 square miles. That's a 10 percent increase over 2008 and accounts for about 10 percent of the Co-op's budget.

The Co-op continues to carry a large debt load, more than $136 million, about $2 million more than in 2008. Most of that debt was incurred when the small rural Co-op bought Pacific Power & Light's primarily urban assets here in the Flathead. Interest expenses topped $8.4 million last year, accounting for about 10 percent of the Co-op's budget.

Nonetheless, the Co-op reported a $6.6 million "operating margin" last year, up by nearly $2.5 million from 2008 (co-ops generally do not speak of "profits"). The Co-op also returned $2.1 million in capital credits from the year 2002 to current and former members. More than 38,000 checks were sent out last December.