Electric deal may leave consumers powerless
Montana Power sale could cost counties money and drain local controlWant to buy a used dam? How about a coal-fired power plant in Eastern Montana?
When Montana Power Company announced last week that it would sell its electricity-producing assets -- possibly $1 billion worth, including 13 dams and four power plants -- the utility's stock jumped. But what's good for Montana Power may or may not be good for Montanans.
Consumer advocates, already wary of possible rate hikes in the wake of the state's deregulation of the industry last spring, aren't convinced that whoever controls the juice under the new rules will provide the down-home neighborly service and prices we've come to expect from Butte-based Montana Power.
If the company sells the plants, the first to notice might be the state's 56 counties, which rely on $14 million Montana Power kicks down annually in taxes on the assets in question. Any buyers -- most likely a large, nationwide energy provider -- will be taxed well below the 12 percent Montana Power pays annually, thanks to the quirks of Montana tax law. (A company operating in the state as a power producer -- rather than a utility -- would be assessed at a rate of six percent).
That tax rate isn't encouraging the company to keep its hardware. "Nobody else in the state is taxed at that rate," says company spokesperson Dean Conklin. "That's what counties are antsy about: 'Geez, what if we lose this golden goose?'"
States, always looking for a few extra golden eggs, often levy heavy taxes on utilities, says Conklin. And that's fine under the old regulated system, he says, whereby the company's interests were protected from competition. But with deregulation -- brought about by Montana Power-backed S.B. 390 last spring -- the company would have to compete with other power suppliers taxed at a lower rate.
Some consumer advocates fear that big companies will take advantage of the situation to buy up Montana's bargain power plants, integrate the power into a wider grid, and zap Big Sky customers with larger bills.
"That's the David Ewer theorem," says Conklin, referring to the Helena legislator who is proposing a special legislative session to attack the issue. "The idea that somehow we're going to wind up being screwed by other people is just a nutty theory."
"Dozens, if not scores or more of" power marketers are signing up to do business in Montana and that competition will keep prices down, says Conklin, repeating the oft-quoted theory used to promote deregulation -- that a freer market means lower electric bills. But there's no guarantee the big players will be falling over each other trying to woo Montanans with the lowest rate, or that people won't be hounded at home by power companies, a la Sprint and MCI.
Nevertheless, Conklin sees Montana customers saving about $160 million over the next four years due to the sale. Under the new law, Montana Power could have handed consumers a bill for that amount, to cover the company's "transition" or "stranded" costs accrued during the regulated years. But consumers won't have to subsidize that shortfall if the company ditches the plants.
Some of that $160 million will benefit the company's biggest customers, outfits like Stone Container and the University of Montana. Big buyers will also have first crack at the competitive rates deregulation is supposed to bring, with the first round of new deals scheduled to begin next summer.
Still, as the new free-market forces shape Montana's energy future, some fear that the power's new manufacturers will not be accountable to Montanans, who not only pay power bills but also have to live with whatever environmental or health issues are associated with the plants.
"If a huge company were to buy them, we'd probably have less control over what happens with the plants," warns Lila Clemenshaw of Montana Environmental Information Center.
So who wants to buy these plants? It's likely to be a large corporation, Clemenshaw says, as smaller companies aren't as willing to take on the risks associated with dams (which could someday be saddled with pricey fishery restoration costs) and coal-fired plants (which could face a future of carbon taxes or strict pollution regulation).
"In this new deregulated market, having generation facilities is one of the riskier things to be involved in," says Clemenshaw.
And not just in Montana. Nationwide, the wave of power deregulation is leading to fire sales on the power plants. At least 20 utilities are trying to sell their electricity-making facilities, says Conklin. Like Montana Power, the utilities remain carriers, owning the actual transmission and distribution lines.
Goldman Sachs of New York will administer the auction of Montana Power's assets. Forty or more companies are expected to show interest, Conklin says, and the deals should be complete by late 1998.