Water Credit: A Little More Info...

It is no surprise to anyone following the whole coal plant debacle that the City of Great Falls has mortgaged city water rights to SME to subsidize Electric City Power sales. In other words, the price of power to some of ECP's customers has been artificially reduced because the City is paying for almost 14% of these customers' power bills.

This was originally discussed by City Manager John Lawton in a September 21, 2004, Agenda Report. In discussing the first power purchase contract with SME, our City Manager said: "Part of the deal with SME will be to exchange a low price for electricity now for future consideration for water for the Highwood Station generating plant. We will work out the details later, but this approach is necessary to give us rates that are as close as possible to SME’s other wholesale customers. That price differential will be offset in the future, on a dollar for dollar basis, by lower raw water prices SME will pay the City."


"Necessary to give us rates that are as close as possible to SME’s other wholesale customers" That's an interesting way to put it. Especially in light of the City's statements since then. City representatives have been touting the success of Electric City Power (see, for example, here) claiming that it has been providing customers with great rates, great service, yada, yada, yada.

Well, not really. You see, all that really happened is this: SME went out and purchased 5 MW of power from PPL Montana at their basic rate. Then the City told SME that if it would re-sell that 5 MW to Electric City Power for $5.70 mWh less, the City will pay SME back later.


Doubt me? Here's the agreement:

Let's pretend I am Bill Gates. I go out and buy 10,000 Chevrolet Corvettes at the market price. Then I go tell XYZ Auto that I will sell them those Corvettes for $60,000.00 each, but they only need to pay me $500.00 today. The remaining $59,500.00 will be paid to me later.

XYZ Auto puts an ad in the paper, and offers 10,000.00 Corvettes for sale for a mere $500.00. They sell like hotcakes. XYZ has $5,000,000.00 in the bank and runs around telling everyone that they are the greatest car dealers in all of history. They sold 10,000 Corvettes in a day and saved their customers over $59,000.00 apiece.

Woo hoo.

Sure, there's the little thing about the $59,500.00 per car that they still owe, but hey, they get to use assets that belong to other people to pay that back, right?

Would you accept that line of reasoning?

Do you accept that line of reasoning?