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Arbitration Panel to Decide Kerr Dam Price Tag
Tribes seeking acquisition of massive hydroelectric facility near Polson
Kerr Dam - File photo by Justin Franz | Flathead Beacon.
An arbitration panel is preparing to announce the final price tag for Kerr Dam, the 194-megawatt hydroelectric plant at the natural outlet of Flathead Lake near Polson.

The American Arbitration Association held a hearing late last month in Newport, Calif., involving the facility’s current owner, PPL Montana, and Energy Keepers, Inc., the new corporation tasked with acquiring and eventually operating the dam for the Confederate Salish and Kootenai Tribes.

The CSKT is looking to acquire the dam, which sits on the Flathead River within the Flathead Indian Reservation, by September 2015 as part of an agreement dating back to 1985. The massive facility, which began operating in 1938, can store upwards of 1.2 million acre-feet of water and produce enough energy to power nearly 150,000 homes. With the acquisition, the CSKT would become the first American Indian tribe to own and operate a major hydroelectric power plant.

A three-member panel was established after both sides failed to reach an agreement on the purchase price. PPL Montana set the total acquisition cost at $49.5 million, while the tribes claimed a much lower price of $13.5 million.

The arbitration panel reviewed arguments from both sides and settled on partial costs within the overall agreement and a final decision on the overall agreement is expected by March 5.

The panel sided with PPL on the value of Kerr Dam’s hydroelectric plant, roughly $16.56 million, which was roughly $1.9 million more than CSKT’s estimate. Regarding flooding rights, the panel sided with CSKT and rebuffed PPL Montana’s attempt at including $987,300 in legal fees related to a long-standing lawsuit over flooding rights at Flathead Lake. The panel told the company that those costs would not be included in the tribes’ acquisition price. Also, roughly $102,700 in employee severance costs proposed by PPL was also rejected.

“We are pleased. Through these hearings, we got our day in court, and this partial award reflects some significant wins for the Tribes,” said Brian Lipscomb, CEP of Energy Keepers. “We feel optimistic that our position is solid, and that our team did an excellent job in presenting our case before the panel. Now we will wait and anticipate their ruling that we expect to reflect what we agreed to in 1985 fo the remainder of items in question.”

The largest remaining question mark revolves around environmental mitigation costs that PPL contends should be included in the agreement and valued at $31.7 million.

PPL Montana purchased Kerr Dam in 1999 from Montana Power Company as part of the utility giant’s sell-off after the state deregulated the power industry.

The CSKT has been the co-licensee for Kerr Dam since 1985. Under terms of their contract, the tribe has the right to acquire the project at “original cost less depreciation” in the fall of 2015 and become the sole owner and operator. The dam produces an average annual output of 1.1 million megawatt-hours. The CSKT formally began to negotiate the acquisition in 2010.

PPL Montana's hydroelectric facilities include Kerr Dam, its Thompson Falls Dam on the Clark Fork River; Madison Dam on the Madison River; Hauser, Holter, Black Eagle, Rainbow, Cochrane, Ryan and Morony dams along the Missouri River; and Mystic Lake Dam on West Rosebud Creek.

PPL has agreed to sell 11 facilities, including Kerr, to the largest electric utility in Montana. Northwestern Energy, with more than 340,000 customers, has agreed to pay an estimated $900 million for the facilities.

Last week the Montana Public Service Commission voted 5-0 that Northwestern’s initial approval request was inadequate and asked the utility giant to provide additional figures that explain the impact of the deal on Montana customers. The company has said the acquisition would raise electric rates by about 4.2 percent.

NorthWestern has said the application also contains commitments to transfer the Kerr Dam to the CSKT.
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