Electric rates on their way up

By Jody Robbins

Flathead Publishing Group

April Fool's Day has just passed and the clocks were set forward an hour. While most slept, 2 a.m. became 3 a.m. and by that time Flathead Valley electric bills had also been moved forward, averaging an increase of between 25 and 32 percent.

The Flathead Valley Electric Cooperative announced the rate hike on Tuesday, with general manager Warren McConkey citing ballooning wholesale power costs as the direct cause.

The co-op found itself in front of a not-too-happy public (more than 700 people) at Saturday's annual meeting for members. More than one resident criticized the board's business practices and went further by voting two long-time board members out of office. New board members Bill Hedstrom and James Malone will replace Ken Krueger and John Dalimata, who have both served as trustees for over 25 years.

co-op member Don Gaynor expressed his personal dissatisfaction with the situation at the meeting and related the following in a Monday interview.

"It seems to me that the management of the co-op - for whatever reason - did not have the best interests of the membership at heart," Gaynor said. "Sound business practices seem to me to dictate that you get things on contract for as long a term as possible.

"It may not be the best price available at the moment, but if you're going to just try and play the stock market, so to speak ... well, if you're doing it with your own money, that's one thing. But when you're doing it with other people's money, that's too chancy and it's just not the way I feel a prudent business should be run."

Gaynor admits that looking to the past may be like closing the barn door after the horse is already gone. State Sen. Bob DePratu was less inclined to fault the co-op's board of directors and places a good share of the blame on the current state of affairs in the power industry.

"They made a business decision on the best information they had available and the way it turned out, that doesn't always work out and that's the way with any business," DePratu said. "In this case it probably didn't work out for the best, but I believe they did the best they could with the information they had at the time."

With the rate hike becoming effective on the day after the annual meeting, co-op executives knew they would have to face an unhappy public. The game plan at this point, according to Mike Radel, the co-op's communications manager, is to look for contracts that will replace the ones expiring this year and/or to negotiate better deals. Some of the co-op's multiple contracts are exposed to market index pricing, which could send prices soaring even higher into perpetuity, if not capped.

The amount of the increase will be determined by energy costs, which the Bonneville Power Administration should make known at the end of June. The range at this point looks to be anywhere between zero and 400-percent. co-op communications manager Mike Radel admitted that finding advantageous contracts could be difficult, but that staff will try and use creativity to achieve the necessary ends.

"The annual meeting came right at a time when we announced a rate increase and the membership showed their frustration," Radel said. "We share the same frustration and, as hard as it is to believe, we understand. We have to pay the very same prices. This is a co-op, so it's no fun for either side.

"It's a very important issue and everybody needed to share their opinion and they had that opportunity. Their frustration was very evident and management and the board expected that, but will continue to work hard on developing new contracts."

The supply problem is partially attributed to the lack of water for hydroelectric power generation, through which the Bonneville Power Administration (BPA) derives most of its energy production. It is also due to the BPA's overselling of power that it will now have to buy back in an inflated market.

"Bonneville has obligations to serve more load beginning October 1 than we currently have resources available to generate that power, so we are going to have to buy additional power," said C.T. Bedde, Bonneville's Montana customer account executive. "We over sold by 3,000 megawatts, so we're going to have to buy that power on the market and prices for wholesale power are at historic, unheard of levels and as a result, we are faced with a significant rate increase, the extent of which we don't even know yet today."

The co-op's last rate change came in October of 1996, according to Radel, when bills were lowered by 15 percent. But the co-op and its members are facing a major challenge and there's no way around it at this point, DePratu said.

"Long term, we need to get through this hump and it is going to be a hump," the senator said. "We've got quite a package of energy bills down here that will work as a carrot and a big stick.

"The carrot is if the power companies come through and moderate their pricing, it'll be good for them. If they don't, we'll tax them very heavily and return that tax to the appropriate Montana people," he continued. "We've got a package of 15 bills between the Senate and House that work on this and also on the idea that Montana could become a strong energy producer."

The increase already in place should allow the co-op to overcome last year's budget shortfall of $2.3 million, creating an extra $10 million in revenues. But that is only the quick fix and nothing short of a strong conservation effort will likely give Montanans a reprieve from this blow to their cost of living.

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-- Martin Thompson (mthom1927@aol.com), April 06, 2001