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A Shock to the System

How utility deregulation became a statewide disaster


Silence fell over Butte this week as trucks quit running, dust settled, and the mines shut down. In a stunning example of reverse economic development, some of the only jobs that pay more than Montana’s miserable average income came to an end as miners laid down their tools, picked up their lunch buckets, and went home. Did they run out of ore? No. Did environmentalists, always the handy whipping boy, shut down the mine? No. It wasn’t even those labor unions, trying to get a living wage for their workers. Simply put, Butte is out of business because the mining company could not afford to buy the electricity it needs to operate. For a century, Montana has generated all the clean hydropower we need from our own rivers. So abundant is our supply that we even export surplus power. But suddenly, we are out of affordable juice, people are out of jobs, and everyone is asking, “What the hell is going on?”

This sad and complex tale starts in the waning days of the 1997 Legislature when lawmakers suspended their own rules to allow the late introduction of a bill being pushed by Montana Power Company (MPC), which was then the state’s largest electricity supplier. According to MPC’s theory, if we ended regulation of the electricity industry, competition for customers would create opportunities for new sources of power and a better deal for all Montanans.

“But wait,” cried a handful of conservation lobbyists and dereg skeptics like Helena’s Rep. David Ewer, “we already have some of the lowest prices for electricity in the nation. With so little to gain and so much to lose, what’s the rush to try this huge experiment?” Unfortunately, their pleas rolled off legislators dulled by the dinners, drinks and drone of MPC’s legion of lobbyists, who freely spent record amounts to get their message across. In one of the worst public policy decisions of modern times, and without considering the full consequences of their actions, these not-so-visionary leaders stuffed the bill through both houses of the legislature. Governor Racicot gladly signed it into law and Montana leaped blindly into full-scale electricity restructuring, the first state in the Northwest to do so.

What came next surprised everyone—except perhaps, those who had laid their plans so well. Only a few months after the legislature approved deregulation, Montana Power announced that its electrical generating facilities would be sold to the highest bidder. Before anyone even knew what was happening, the coal-fired power plants, hydroelectric dams, and their lands were sold to an out-of-state megacorporation, PP&L Global, for nearly a billion dollars. In a flash, the reservoirs and dams that had supplied Montana’s citizens with reliable power for so long were no longer ours. Now, they were just “generating capacity” that happened to be in Montana, but the power would go wherever the highest price could be had. When questioned by reporters concerning plans for the electricity, a PP&L spokesman said, “We are selling a commodity, a quantity of electrons, and we will sell it at what the commodity market can bear.”

The sale hit Montanans like a blow to the solar plexus—especially those who had supported deregulation. Only the first of many unforeseen consequences, it seems no one had considered the possibility that MPC might just sell its assets lock, stock and barrel. Recently, MPC announced it was selling off the poles and wires of its electrical transmission system, pouring the revenues into their telecommunications subsidiary and getting out of the power business entirely. What was unimaginable only a few short years ago has now become reality.

Meanwhile, the promised competition to serve Montana’s sparse and far flung population has yet to materialize. Instead, current projections estimate an increase of at least 40 percent for residential and small commercial electricity consumers may well occur. If the skyrocketing rates now shutting down businesses are any indication, things may get even worse than expected. In a state with an economy at the bottom of the national barrel and subject to long, bitterly cold winters, paying significantly more for a necessity like electricity is not a welcome thought.

Gregg Groepper is the executive director of Montana Energy Share, a non-profit effort to help low-income residents pay the costs for keeping warm. Groepper is concerned that increases in the cost of electricity will have an immediate and damaging effect on Montanans. “The state Department of Revenue estimates there are 78,000 families at or below the poverty level in Montana. Right now, Energy Share only has enough resources to help about 1,000 of those families. All the economic theories of dereg aside, if costs go up, more people will suffer.”

At least others are learning from our mistakes. After the surprise sale of MPC’s dams, Idaho State Senator Laird Noh requested an analysis of what would happen to Idaho’s water rights if their dams were sold. The answer was chilling—and fully in line with the impacts we can expect in Montana. As a result of Noh’s investigations, Idaho’s dereg legislation has been put on hold. Is it something Montana could have done? Absolutely—but it didn’t happen. Oregon’s dereg legislation prohibits the sale of generation assets. Could we have done that? Sure—but in their blind rush to deregulate, our great leaders simply didn’t think that far ahead.

Butte may be only the first casualty. Other major electricity users are quaking in their boots as they watch the vagaries of the anything-but-free market. In 2002, residential electricity consumers can enjoy the benefits of deregulation, too, in the form of increased rates. But tell me, if our costs soar like those of the major industrial users, how will we shut down our homes? Who will we lay off? I guess we’ll find out, because, thanks to the blunders of Racicot and the Republicans, Montanans are on the cutting edge of deregulation—and we are bleeding.

George Ochenski has lobbied the Legislature since 1985, primarily on environmental, tribal and public interest issues. He works as a writer in Helena. The opinions expressed in “Independent Voices” do not necessarily reflect those of the Independent.

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