In what amounts to one of the biggest decisions they have ever faced, trustees of Flathead Electric Cooperative will vote at their March 26 meeting on whether to join an Oregon-based group of utilities. Those who support the deal say it will lay the foundation for lower electricity rates for FEC’s members over the long term, as the cooperatives invest together in building new power plants.
But a vocal and deeply concerned group of trustees are critical of the deal, chiefly because they think joining the group may imperil the large allocation of inexpensive power FEC receives from the Bonneville Power Administration. These members say they would be more supportive if a vote of the entire FEC membership indicated broad support for the venture. They also question whether Montana statute requires a vote of the full membership for a decision that could “encumber” the Bonneville power allocation enjoyed by Flathead residents.
“There’s a lot of uncertainty here about what we need and when,” Emery Smith, the District 2 trustee representing the lower valley, said. “I’ve always advocated membership involvement and I don’t want to make that huge of a commitment without members being a part of it.”
As of this writing, however, there are no plans by the FEC board to open the decision up to a wider vote. During the question-and-answer portion of the FEC annual members’ meeting Saturday at the Kalispell Christian Center, David Myerowitz, a resident of Columbia Falls, asked FEC General Manager Ken Sugden why no information has been distributed to the co-op’s membership explaining the potential benefits and drawbacks of the deal.
“The lack of accurate information is a real problem,” Myerowitz said. “Do you have plans to inform the membership of options before you make a decision?”
Sugden replied that the board is under a deadline to make a decision by April 7 with the group, Portland-based Pacific Northwest Generating Cooperative (PNGC), which is made up of 16 electric utilities in seven states.
At issue is the pressing responsibility on FEC’s leaders that they find ways to meet the growing demand for electricity in the Flathead. At present, FEC receives nearly all its electricity through Bonneville, generated by the Columbia River power system, at a rate of 3.5 cents per kilowatt hour – an extremely low rate compared to just about anywhere in the nation. In 2008, the board signed a contract to keep that power allocation through 2028, capping it at the current load of about 170 megawatts annually. The cap kicks in October of 2011.
But demand in the Flathead is forecast to grow by about 2-3 megawatts per year, and FEC must find its own power sources to accommodate anything over the capped amount it receives through Bonneville. New conservation programs and alternative energy ventures will help meet demand, but fall far short of providing for the growth predicted over coming decades. In the short-term, board members have voted for FEC to obtain additional power needs from Bonneville for three years beginning in 2011. Those rates are likely to cost between 5 and 6 cents per kilowatt hour.
“It’s more expensive than the federal power, but compared to the market on a long-term basis, it’s not that bad,” Sugden said in an interview last week. “By September of 2011, we have to tell (Bonneville) how we’ll get (power) the next five years.”
For years the board has been exploring how to meet this power demand, with the broad belief that the best way for FEC to achieve long-term, low rates is by investing in its own power-generation facilities.
“Our industry is pretty risk-averse,” Sugden said. “The utilities that have the lowest, long-term rates have built their own resources, either through a group of utilities or their own.”
But with FEC lacking the funds to build its own power plants, it must enter into joint ventures with other utilities.
“It’s hard for a single utility to go out and build resources on their own,” Sugden said. “It’s way easier to get financing through a group of utilities.”
The board looked at other options, and eventually ruled them out, either because they burned coal and pending federal legislation could make that more expensive, or because transmission was difficult to establish. For more than a year, trustees have been meeting with PNGC, and many now see joining it to be the best option for the Flathead. Sugden said PNGC is exploring new generation facilities, like a proposed combined cycle gas turbine plant, and needs to know whether FEC is in or out, so it can determine how big a new facility would have to be.
But trustees critical of the deal say assigning FEC’s cheap Bonneville power allocation over to the Portland group would jeopardize an extremely valuable asset should FEC ever decide it wanted to leave the group. It is a step that should not be taken, according to Jay Downen, the District 3 trustee representing Whitefish, without a vote of the entire FEC membership.
“They require us to assign our BPA allocation over to them, and that’s very problematic for me,” Downen said. “I don’t want to have to assign our allocation away.”
Sugden disagrees, saying FEC would retain full control over its cheap Bonneville power even if it joined PNGC then opted to pull out, and Bonneville’s contract with FEC maintains that protection.
But Paul Holland, the District 8 trustee representing Bigfork, is not so sure.
“Can we count on getting our allocation back or not?” Holland said. “The truth is, no one really knows.”
Sugden was asked, at the annual meeting, whether FEC was required by state law to have a vote with the support of two-thirds of its membership before making any decision that would “encumber” such a substantial portion of its property.
“That’s a question for the attorneys but I’ve heard the interpretation differently,” Sugden replied.
Trustees critical of the PNGC deal also say the poor economy has caused population growth in the valley to taper off, giving FEC more time to search out new power. They question why they are under such a tight deadline from PNGC.
“I’m not going to feel guilty about not joining the club,” Holland said. “I’m not here to help PNGC estimate how big they’re going to be; I’m here to protect the membership of the cooperative.”
Trustees critical of the deal are also concerned FEC’s voice could be diminished if it joined the Portland group, noting the Flathead would have one vote among 17 utilities, despite a membership that dwarfs the other utilities currently comprising PNGC. They say FEC’s initial investment could be $8 million or higher, a number Sugden disputes.
Based on interviews, a majority of trustees on the nine-member board appear to support joining PNGC. Holland said if a board vote appears imminent, he may make a motion to include the entire membership in a vote – a move he believes would be tough for other trustees to oppose.
“I think the membership should be involved in it, totally,” Holland said. “It’s a very important issue for the Flathead Valley, so therefore we don’t want to goof it up.”