YVEC wants out of power contract

MONTANA - The Yellowstone Valley Electric Co-op sank roughly $7 million into the proposed Highwood Generating Station before it was severed from the project last year.

But the co-op is still contracted to purchase power from Southern Montana Electric Generation and Transmission, the group promoting Highwood, and that rankles YVEC General Manager Terry Holzer.

"We want to terminate our power contract with SME," he said during the co-op's annual meeting in Billings. "We want to recover our investment and end our membership in" SME.

In his annual report, Holzer outlined how the cost of power had risen sharply since 2003 — the same time frame during which the co-op had partnered with SME in its plans for Highwood. "Four years ago, it was a good project," Holzer said. But when construction costs doubled and the Rural Utility Service denied a loan for the project, citing it as being financially unfeasible, "we said that's enough for us," he said.

Like other electric co-ops, the YVEC has raised customer rates. Last spring, members faced an 8 percent increase, and Holzer predicts another 8 to 10 percent jump in May. He attributed the higher rates to three things: the high cost of power through SME, growth in the co-op's facilities and increased debt.

While the YVEC is no longer involved in the Highwood project, the co-op did take a look at SME's most recent proposal. Originally planned as a 250-megawatt coal-fired plant near Great Falls, Highwood has been downsized and changed to a 120-megawatt natural-gas plant bolstered by an additional 6 megawatts of wind power.

But Holzer sees the same problems — high costs, the feeble financial environment, public outcry and environmental challenges — for the natural-gas plant. The cost of gas is economical now, he said, but its price has fluctuated wildly since last summer. According to a study commissioned by the YVEC, the cost of power from a natural-gas plant is projected to hit 11.7 cents per kilowatt hour, close to triple the 4.5 cents customers were paying for electricity in 2008.

Holzer also railed against substantial cost breaks given to the city of Great Falls, at the expense of SME's member co-ops. While the co-ops were hit with surcharges and rate increases, the city got a pass, he said.

"All of these (breaks) have added up to millions and millions of dollars of subsidies (from the co-ops) to the city of Great Falls," he said.

In December 2008, the YVEC filed a lawsuit against SME and its member co-ops, seeking to terminate its power contract, recover its investment and end its membership with SME. Attorney John Crist, who represents the YVEC, said the case is not scheduled to go to trial until April 2010.

In the meantime, the YVEC is contracted to purchase power from SME through the fall of 2011. During the interim, said YVEC President Dan Swartz, the co-op is prohibited from entering into discussions with other power suppliers. But Holzer expressed confidence that the co-op would be able to secure better rates and more secure power from other sources. "And with less risk," he said.

Looking to the future, Holzer strongly encourages members to consider geothermal heating and cooling. With tax credits and breaks now available, he said, "you can put in geothermal for about the same amount as a natural-gas system."

Among the other items on his list of "what should we do?" Holzer promotes the construction of more hydro and nuclear facilities, improving building standards for added energy efficiency, accelerating development of carbon capture and sequestration and giving incentives for creating new energy sources. He also made a plea to the crowd to ask Montana's congressional delegation to back off plans for carbon taxes and regulations.

"Global warming, right now that's not America's priority," he said, showing a poll of the nation's concerns. "Global warming can maybe wait another year or two."


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