4/14/97

KUFM/KGPR

T.M. Power

Legislative Protection for the Montana Power Company

The Republican-controlled state government is on the verge of passing the Montana Power Company Stockholders’ Relief Acts of 1997: Twin massive bills aimed at protecting the state’s dominant electricity and natural gas utility as competition begins to creep into their previously monopolized markets. Of course, all businesses would like to get this sort of legal assistance in assuring that competition never threatens past investments or contracts, but only Montana Power has the political clout to ask for and get this sort of legislative protection for its stockholders.

When Montana Power insisted on building the Colstrip 1, 2, 3 and 4 power plants in Eastern Montana, it insisted that we would freeze in the dark, unemployed because of electric shortages if they were not allowed to build the plants. They got that permission, and then proceeded to nearly double everyone’s rates to pay for those plants. Fortunately, legal challenges by consumer advocates kept Colstrip 4 from being added to our bills too.

Of course, Montana Power was flat out wrong about the need for those plants. It was a surplus of electric power, not the projected shortages, that allowed us to keep Colstrip 4 from being foisted off on us. Montana Power almost went bankrupt because of the financial drain associated with not being able to sell the output from that uneconomic plant.

The same competition from more economic sources of electric supply is now leading Montana Power’s largest industrial and other utility companies to look elsewhere for power, abandoning Montana Power’s expensive sources of supply. Montana Power does not want to face the same financial drain they suffered with Colstrip 4 with its other coal-fired plants and the long term contracts for electric supply it has entered into. This time, it wants customers to pay the bill for the uneconomic commitments it has made. It has found warm and fuzzy support for this effort to nail electric consumers in both the Legislature and the Governor’s Office. The conservative, free-enterprise Republican majority is on the verge of socializing the private risks that this private utility took with risk-taking stockholders money. The proposed legislation would transfer all of these risks to customers, especially residential and small business customers. Bonds would be floated to allow Montana Power to immediately get its money out of these loosing investments and contracts and stick customers with these costs indefinitely into the future. The cash-rich Montana Power Company would then chuckle all the way to its next investments.

One would have expected at least some sharing of the losses associated with the bad business decisions that Montana Power made. As a private business, it certainly has some responsibility for its own business choices and how well or how badly they actually turn out in real world markets. But the legislature says no. All should be forgiven, with customers’ money of course.

There are right ways and wrong ways to usher in competition to electric markets. The Montana Power Company, working with other utilities in the state and with its largest industrial customers have figured out the approach the is best for them. This is not surprising. One would expect them to ask for the sun, moon, and stars. What is shocking is that the legislature and the governor are willing to give them what they ask for: a levy that is the equivalent of a 15 to 20 year tax on utility customers. So much for the Republican opposition to picking the pockets of taxpayers. They have simply relabeled the taxpayer a ratepayer and signed the check made out to Montana Power that the utility asked for.

It did not have to be this way. The Montana Public Service Commission, an elected public body, was in the process of systematically studying and implementing competitive access to electricity and natural gas. It was doing this with an eye on maintaining consumer protection in the process. The division of responsibility for past financial commitments would have been determined after evidentiary hearings. Regulation of utilities would have been relaxed in proportion to how much effective price-constraining competition actually developed. But this review of its plans by an agency committed to protecting consumers while respecting the constitutional property rights of the utility was not acceptable to the Montana Power Company. It chose to go directly to the legislature and get it to mandate most aspects of deregulation, including 100 percent protection of stockholders. It knew that there would be less concern for consumers and more concern for stockholders and large businesses in the legislature.

Unfortunately, it looks like MPC was right in that political judgment. The Montana Power Company Stockholders’ Relief Act of 1997 seems to sliding on greased rails towards passage.