At 21:33 of the Coal Plant Video

At 21:33:

Ed McKnight: I would like to ask Commissioner Kuntz, you talked about stepping up and taking leadership in this power process. And yet all the information I have, either the coal plant or Electric City Power, you have done nothing but lose money.

Channing Hartelius: So is that your question?

McKnight: If losing money is an indication of leadership, is that the kind of leadership that we need?

Hartelius: Did you under...did you get the question?

Diane Jovick-Kuntz: I did. And again your figures and my figures are different on the losing money. You've gone to the budget and picked one particular line item out of our budget and said we're losing, we're losing, we're losing. You have not gone and visited with Coleen Balzarini on a regular basis regarding this issue so you view us as losing, losing, losing. I don't view it that way, and I think with Electric City Power, because of the obligations that we have, for the contracts, for the next 20 years, there will be enough revenue to carry us through. And we will not continue to lose money.

Hartelius: Thank you Diane.

[Emphasis Added]

See, p. 28, p. 7 in Adobe Acrobat: Operating Loss, Electric Fund:
-404,973.

Actually, I think we have the same figures, don't we? And yes, I am picking out one line from the AUDITED financial statements. It's the line called "Operating Income (Loss)."

The obvious: If we're not losing, losing, losing right now, how can we "continue" to lose money? Good question, eh, Dr. Freud?

Mission Possible

Confidential: Gregori

Good Morning Tim,

Southern Montana Electric requires energy urgently. Problem is, the best coal is in SW Montana but the local residents don’t want the exposure to more toxic waste. Red Lodge is the next Big Sky you know.

Your mission Tim, should you choose to accept it, is to weasel your way into getting Geek Falls elected officials to trust you and convince them to eliminate a public vote on this controversial issue. Then use their pristine water, build a coal plant, leave the pollutants behind, and send the energy back to the Billings area so they can put up another Red Lobster or Olive Garden.

PS. Extra virgins if you piss off General Electric by building a conventional coal plant instead of one using their IGCC technology.

This message will self-destruct in 10 seconds. Good luck Tim.

Mr. Secretary

Maybe it WAS the money

From the Great Falls Tribune, Sept 30

"They offered $500,000 in cash and we offered $500,000 in loans," Brett Doney, Great Falls Development Authority President said: "We just don't have the resources for cash incentives." John Oliver, a GE Commercial Finance spokesman, said he was not part of the final negotiations and can't say whether or not the cash incentive was the piece that tipped the scales in Billings' favor.

From the Billings Gazette, Oct 12

On Thursday, the Big Sky Economic Development Authority and a sister organization, the Big Sky Economic Development Corp., each agreed to pay $25,000 per year for 10 years to GE. The $500,000 in financial incentives played a big role in landing the GE operations center in Billings, said Joe McClure, executive director of Big Sky EDA. Big Sky EDA is financed primarily through a county wide tax levy. Big Sky EDC is financed primarily through contributions from private businesses.

"This is one of the items that set us apart when GE was looking at where to locate," McClure said. McClure said there were no strings attached on how GE can spend the money. He said offering financial incentives is part of the cost of job recruitment. McClure had no idea what other Montana communities had offered as incentives, but the Billings package was described as "convincing" by GE officials.

Show me some honesty. The city of Great Falls clearly has the financial resources for this level of cash incentive. The city committed 1.4 million dollars for the coal plant speculative investment. There now appears to be the equivalent of one or two full time employees working on this fiasco. Eliminating these positions would likely save $50,000 yearly.

We have resources, we lack leadership.

Stratego

Remember the game, Stratego? It was supposed to be a great strategy game, requiring you to think far in advance about your opponent's moves and possible moves. I liked the game, but always thought it was more simplistic and tactical than strategic.

The law business, though, is more strategic. When you do something, you should have a specific reason for doing it, and you had better anticipate just what your adversary might do in response. If you do not anticipate opposing arguments, you can easily find yourself in a difficult position explaining to your client why you opened a particular can of worms to begin with.

Normally, though, when you're litigating, you do not try to 'refute' your adversaries arguments until he or she raises them. You see, there is always a chance that a good counter-argument could be missed, and we are not in the business of educating our opponents.

The same is true here. When I write a piece, I often try to anticipate what I think those with a differing opinion might say in response. Whether or not I include those arguments and try to 'refute' them in posts is primarily dependent on time.

I posted a piece a couple days ago about the City of Great Falls' Pilot Program. In that piece, I pointed out that the available evidence suggests that members of City Staff, Electric City Power's Board of Directors, and others, are receiving electricity from Electric City Power at a price below ECP's cost. In other words, according to what I can find, these people's electric bills are being subsidized by taxpayers. When I wrote the piece, I anticipated a few arguments against it, but time constraints prevented me from considering them at the time. So now I'll lay out what I think they are.

It's De Minimus.

This argument was already raised by our friend Wolfpack, and I think it's a relatively effective argument, at least against suggestions that the Pilot Program demonstrates some sort of inside dealing as opposed to simple ineptitude.

In other words, if one were acting with malfeasance instead of misfeasance, would one really go out on a limb for a few dollars a month? I don't think so.

On the other hand, given the amount of controversy engendered by the entire ECP and coal plant issue, one can easily infer that more adept management would anticipate that a sub-market power deal would simply look bad and given the de minimus nature of it (it is, after all, a few dollars a month either way) would not have bothered to risk the negative publicity in exchange for such relatively small savings.

The assertions about power costs are factually incorrect.

This might well be a legitimate statement. ECP purchases power from SME under various contracts at various prices. I focused on the November 2006 purchase contract because the Small Customer Pilot Program was specifically offered as a justification for purchasing that additional block of power. I fully concede that, by blending the rates from the various blocks of power, the actual cost to ECP of the power resold to Mr. Lawton, et. al., might be lower. There's really no way for us citizens to know.

But I do stand by this: Taxpayers are subsidizing the rates that the Pilot Program customers are paying. ECP has, in fact, lost money according to the audited financial statements (in excess of $400,000.00). Taxpayer dollars are helping to fund the development costs of the Highwood Generating Station and a public asset (water) is being used to subsidize some of the rates offered by ECP. ECP is being operated at a loss by government officials who are compensated by City of Great Falls tax dollars (some of whom are also getting below market power).

Given all of the taxpayer involvement in this particular operation, can one truly justify selling the insiders power for less than Great Falls citizens can buy it?

The below-market power is an incentive for the Pilot Program customers to take the risk of buying their power from ECP.

What risk? Seriously, what risk?

All Electric City Power does is buy power from SME and then re-sell it to ECP's customers. ECP is not out on the open power markets, buying contracts, hedging prices, etc.

SME says it is more than qualified to provide power. The "core staff that launched Southern Montana Electric G&T (Warren Bickford and [Tim Gregori]) has a total of 58 years experience in the electric utility industry. [They] have a combined 32 years experience in wholesale power supply and transmission capacity procurement. From the time the decision was made to form Southern Montana Electric G&T in November 2003, Warren Bickford and [Tim Gregori]have negotiated contracts with the Bonneville Power Administration Power Business Line(BPA PBL), the Western Area Power Administration (Western), PPL Montana LLC, NorthWestern Energy Transmission Services Group, the Bonneville Power Administration Transmission Business Line (BPA TBL) and the Western Area Power Administration – Transmission Services Group."

So, then, what is this great risk that justifies below market power to insiders?

Avoidance of the Issue/Personal Attack:

This has occurred. First, we have some individual named "bramble," who argues that my position on the coal plant is 'revenge' against John Lawton.

"The blog I refer to is run by a local attorney who has ownership interest in local casinos. He believes the city's sign ordinance and other zoning policies hurt casinos, so he is trying to get even with Lawton by distorting the Highwood Power Plant facts."

Do you know what? The City's sign ordinance and other zoning policies do hurt casinos. They hurt lots of businesses. (Newsflash: It wasn't all, or even very many, casino owners who spoke vehemently against the sign code.) Do you know how many businesses I own that have been affected by the sign code or the zoning law? Zero. So, "bramble" wants to allege a conflict of interest on my part, but ignores the fact that power plant advocates get sub-market priced power.

I would like to believe that "bramble" is an insider, someone who works in City Government. Why? Because "bramble's" post confirms two assumptions many people make about City Government.

First, many critics allege that John Lawton, rather than the City Commission, really makes policy. The assumption in "bramble's" post is that John Lawton created the sign code and the zoning law. If not, why would I want revenge against him rather than the Commissioners that adopted these two acts?

Second, why would stopping the coal plant "get even" with John Lawton unless he has some personal stake in the process? He's about to retire; his benefits are not contingent on the coal plant's success. So, "bramble," what difference does it make to Mr. Lawton whether or not it gets built? Do you know something we don't?

There are several other 'critics' over at the Tribune's forums. That's fine. All I ask, though, is that readers note that not one of them directly questions any factual assertions; they just accuse me of being a "hateful zealot" who "distorts" facts. You tell me who is hateful. Have I personally attacked anyone, called them names, because of a political disagreement?

If one of them, just one, would show up and take issue with a fact, we could then have a discussion. When virtually everything I say is linked to a source document, or if my assertion of an unsourced 'fact' is qualified as such, it's hard to dispute, isn't it?

Conclusion

Those are what I believe to be the primary refutations of my position on the Pilot Program. I wish the Tribune would cover this story so we could see which ones the insiders will use.

To be honest, and I mean that, what I am about to say is absolutely true: I hope that our City's representatives can document that they are not receiving power at a sub-market price. If they can, I will apologize and be duly chastened. I don't want to think that people would do this.

I have friends, clients, and family who live on fixed incomes. They pay taxes. Their power bills hurt.

Pilot Program-The Contracts

I always try to provide the source material for what I write, so, here are the contracts:

I think this "Pilot" should crash.

Some of you might recall a "Pilot Program" whereby the City of Great Falls, acting through Electric City Power, obtained permission to sell electrical power to a small group of residential customers for a 5 year period. This was an idea floated by City Staff, as the PSC denied the City's application to become a small-customer supplier. In response, the City said, in effect, "Well, let us try it with this group and if we can keep the lights on, maybe the PSC might reconsider down the road." When I inquired about this Pilot Program back in June, I was told that "According to Martha Cappis, ECPI has a license with the PSC to provide a small specific group of customers power. The customers were chosen to include small commercial and residential customers that we could not serve under our existing license due to their average monthly usage being below the PSC set limit. We 'brainstormed' to come up up with a diverse group of knowledgeable participants who we could rely on to give us an unbiased opinion of our service, rates, etc. To date, we have not initiated the program." [Emphasis mine]

Now, one nice thing about being a blogger is that people tell you things. So, after the last Electric City Power Board of Directors meeting, I received an email. The following is a direct quote from the email; I wasn't at the meeting, so I cannot confirm that it is accurate: "John L[awton] made a rambling speech complaining about the Bloggers making much about who was on the ECP residential power pilot program list. Lawton said he doesn't read the blogs, but others tell him about what is posted there and it's wrong. The people on the pilot program list were volunteers who understood the risks involved and agreed to participate so the City could test the mechanics of operating a residential power system. While the program may not be safe enough for 'widows and orphans,' the people involved were selected by the City because they understood the risks."

Recently, I have been seeking information from the City about the latest group of customers signed up by the City. Based in part on Mr. Lawton's purported statements at the ECP Board meeting, I have also been seeking information about the Pilot Program.

Well, today we learned something new. I received the following Memorandum from our very helpful City Clerk, Lisa Kunz, after she received it from Martha Cappis:













What do you know? There is a Pilot Program. And the "participants were able to choose a flat rate or an adjusting rate for the term of the program." Ok. And do any of these customers look familiar to you? Balzarini? Lawton? Patton? Gregori? Or how about members of the Electric City Power Board: Gray, Golie, or Ryan?

And there are contracts, too. First there is the "Optional Customer Service Contract." This is the "adjusting rate" that Ms. Cappis spoke of in her recent memo.

























Then there is the "Standard Service Offer," or "flat rate" contract:


























That's all well and good, of course, completely above board and all that. After all, these are certainly "knowledgeable" and "unbiased" participants. Nope, nothing unusual here, move along please...

Wait a minute, though. Humor me. Take a look at the first page of these two contracts. Take a close look at the rates our intrepid test group is paying for its power. The adjustable rate group is paying, for the next 14 months, until 12/31/08, a rate of $0.0472 and $0.0508 per kilowatt-hour. Adding the "Administrative Fee," they are paying a rate of $0.048616 to $0.052324.

Interestingly, though, if we review the Agenda Report from November 8, 2006, we find that the City purchased from SME "an additional 7 MWh's block of power beginning January 1, 2007, through December 31, 2008..." As background for this purchase of additional power, we learned "The proposed Residential and Small Commercial pilot program was recently approved by the Montana Public Service Commission, and services will begin in the near future." Presumably, then, this additional power was purchased, in part, to service the needs of the Residential program, right?

Well, what is Electric City Power paying for this power, then? This power that it is selling to City Staff and ECP Board members for a rate between $0.048616 to $0.052324? Keep reading the Agenda Report.

That's right. We're paying SME $0.0528 for every kilowatt. Electric City Power is then selling these kilowatts to City Staff and ECP Board members for less than it paid for them. It is selling these people power at a loss.

How bad a deal is that for the rest of us? Well, not only are we taxpayers subsidizing the power costs of these folks, we have to buy our power from Northwestern Energy. We're paying $0.056811 for our power, because we don't have taxpayer subsidies for our power.

Wait, you ask. What do you mean taxpayer subsidies?

Think about it. Every time one of the Pilot Program customers uses a kilowatt hour of electricity, Electric City Power loses a penny or two on that deal. It doesn't sound like much, but it does have to come from somewhere.

The Electricity Fund lost over $400,000.00 in the last fiscal year (2006) for which we have audited financial statements. (See p.28)

Electric City Power lost over $400,000.00 and it is selling power at a loss to its Board Members and City Staff?

Am I out of line, here? This just doesn't seem right to me.

Hat Tip: Thanks to Mayoral Candidate Ed McKnight for providing me with the link to NWE rates.

Power Contracts-Part V

I received some very interesting information today.

I hope to get it up on the blog tonight.

It looks pretty fishy.

Power Contracts, Part IV

From the City Clerk, Lisa Kunz:

Hi Greg - pursuant to my requests for the information you requested from me on September 28th, I was delivered a memo yesterday from Martha Cappis, Operations Supervisor, with attachments regarding the long term electric supply contracts and the pilot program contracts. As I understand it, the residential customers are through a pilot program that was approved by the Montana Public Service Commission. If you want to give me a call, I'll go through the memo and attachments with you to determine what you want me to copy for you.

Thanks Greg, I look forward to hearing from you.

I left Lisa a message in response to this email.

I appreciate her efforts, and I am absolutely certain she is attempting to get the documents for me as promptly as she can. She is a straight shooter.

As for the rest of the delay, well...

This Could Be Us.....

AEP to End Lawsuit, Pay to Cut Pollution

American Electric Power has agreed to end a lawsuit by paying $4.6 BILLION to reduce pollution.

If the Highwood Generating Station is built, not only could this be us, but probably will be.

Accountant's Opinion on the "Deposit" (Gift)

On Tuesday, October 2, 2007, SME's accountant, Randal J. Boysun, had a guest editorial in the Tribune about the $1.4 million dollars that the City of Great Falls has set aside to secure Electric City Power's obligations to SME. (I can't find it reprinted online)

The main point of Mr. Boysun's piece is that the conclusion of an earlier piece by Mr. Larry Rezentes is incorrect. Mr. Rezentes suggested that the $1.4 million dollar deposit was, in reality, a way to secure the City's debt back to SME resulting from the City's subsidizing Electric City Power's customer rates. I recall thinking at the time that, while Mr. Rezentes had a point, I couldn't quite get to his conclusion based on the information I had. In other words, while his suggestion was a possibility, it was only that.

Mr. Boysun responded that this deposit is a) a completely normal vehicle used by SME to ensure repayment and b) that it has nothing to do with repayment of the water credit, stating that the "terms of repayment for any amount owed from water credits are specified by a written agreement between the parties."

I've met Mr. Boysun. He's a good guy and, from what I understand, a good accountant.

But with all due respect to Mr. Boysun, his article misses the point. The question is not whether security deposits are the norm in the energy industry; they might well be. The question is why our City Commission elected to give one in this case when it was not contractually obligated to do so. In other words, if SME dropped the ball on the front end and forgot to require it in the contract, why should we give SME a gift now?

Further, as City Commission Candidate Mary Jolley points out in a comment, the "written agreement" he refers to is the same old Water Service Agreement we've known about all along. And no, it does not specify the terms of repayment.

UPDATE: I made a mistake. The link above does send you to the "Water Service Agreement," but that Agreement is not what provides for repayment of the water credit. This is the Agreement that provides for repayment. The relevant language can be found here.

The language is: "Southern shall give the City written notice of its intention to not construct the Highwood Station and the City shall commence making payments toward the rate subsidy within sixty (60) days after receipt of the notice from Southern." (More on this topic here.)

In any event, in a comment below, Mary Jolley says that she will "agree with the accountant" that the terms are "specified by a written agreement between the parties."

I won't agree. Exactly one repayment term is specified: the period in which payments must start. Terms not specified include the period of time for repayment, the interest rate, if any, the amount of the payments, security for repayment (hmmmm...), etc., etc. These are not insignificant items considering we are discussing a million dollar debt.

Sorry about the error.

Is this a success?

The Tribune had this piece today about the City's failure to meet their electricity sales goals.

City fiscal officer Coleen Balzarini did not express disappointment Monday that the city missed its goal of at least 50 MW. "It is what it is," Balzarini said. She said the latest batch of agreements are "very good contracts that will serve us well when we go out to the market." She said city officials were "busy signing contracts all the way through 7:30 last night (Sunday)."

(Really? Why weren't they ready yesterday, then?)

I also received this unsolicited comment on the whole affair from a local professional:

I wonder how much time/man hours of City employees were spent pursing contracts for the City’s supposedly separate electrical utility company. In the end 4.9 of 25 megawatts were sold(and they were not disappointed?). Imagine if all the time spent by the City Manager, the City’s Chief Financial Officer, and the City’s staff on chieving less than 20% of their goal was spent instead on convincing GE Great Falls was a better location than Billings to place its Montana operation. Sorry, I do not have the data to compare long term jobs generated by the Highwood Plant and the GE Service branch. However, I am pretty sure there is a lot less in the way of pollution concerns.

Interesting point...

It's also interesting that we apparently lost the GE branch due to a lack of $500,000.00, ("They offered $500,000 in cash and we offered $500,000 in loans," [GFDA Director] Doney said. "We just don't have the resources for cash incentives.") yet the City had $1.4 million in "excess cash" to tie up for the benefit of SME.

Did Rich Ecke Misquote Her?

In Rich Ecke's article last Wednesday about the City's September 4, 2007, Commission meeting, he stated: "City fiscal officer Coleen Balzarini said the coal plant developer, Southern Montana Electric Generation & Transmission Cooperative, has agreed to make a payment in lieu of taxes to make up for the lack of annexation." (Better check the link quick, as we all know the Tribune doesn't keep 'em up for long.)


When I read that, I then requested copies of the 'agreement' made by SME whereby it agreed to make a payment in lieu of taxes. I received a response today:

The operative language? "To date, the contract has not yet been negotiated." In other words, there ain't no contract. SME has "agreed" to diddly.

Mr. Ecke, did you misquote her? Or did she really say that SME already had agreed to payments in lieu of taxes? Because a "contract" that still has terms undetermined, that "has not yet been negotiated," well, it's just not worth the paper that it's not written on. Because if she said that SME has "agreed" to do something, that's not quite true, is it?

Not all promises are legally enforceable. Without a written contract, SME's promises to do something for the next thirty years are worthless. I don't know what would be worse, if Ms. Balzarini doesn't realize that SME's simple, unsupported promise to do something is unenforceable, or if she does realize that and still said what Mr. Ecke reported.

This is not a new problem. Remember the Development Agreement between the City and SME that hasn't been completed? Is it just me or is anyone else nervous that we seem to have a helluva lot riding on a handshake?

And Mayor Stebbins gets angry when someone accuses City Management of "doubletalk?"

Hey, maybe this one will open the eyes of at least one City Commissioner? Staff is pushing an ordinance that will require the City to provide city services to landowners without annexation. The "payments in lieu of taxes" don't exist in a legally enforceable form. Do any Commissioners care?

Hey! There goes a flying monkey!

Pilot Program

Regular readers will recall that the City, in its attempt to gain permission from the Public Service Commission to offer small (residential) customers default power supply, sought and received permission to operate a 'pilot program' for 5 years. According to Ms. Balzarini, Electric City Power's Executive Director, this program will "be a good opportunity for the City to familiarize itself with serving small electricity customers." All this occurred last fall.

Of course, back in June of this year, then-City Clerk, Peggy Bourne, informed me that this 'pilot program' had never been implemented: "According to Martha Cappis, ECPI has a license with the PSC to provide a small specific group of customers power. The customers were chosen to include small commercial and residential customers that we could not serve under our existing license due to their average monthly usage being below the PSC set limit. We 'brainstormed' to come up up with a diverse group of knowledgeable participants who we could rely on to give us an unbiased opinion of our service, rates, etc. To date, we have not initiated the program." Yes, I emphasized the language.

Well, I have obtained the names of this "diverse group" of people and businesses who were to obtain power from the City's electrical utility. Remember, please, that the City's utility subsidizes its power rates by promising to give SME our water in the future when the coal plant is constructed. I have confirmed the following list with the Montana Public Service Commission:

Balzarini
Source GS
Ten Hundred
Patton
Stephenson
Whitman
Cappis
Boysun
Lawton
First Int
Bennett Mot
Cari Yturri
Lacy & Ebl
Ebling
Gray
Walker
Golie
Gregori

The document filed with the PSC that "identifies who those 20 customers are only has last names in the case of individuals and abbreviations in the case of businesses."

Wouldn't you agree that it's quite a diverse group? And they're very, very unbiased. No coal plant cheerleaders in that group, right?

Missoula.....OUT.

It looks like Missoula is out:

"[T]the controversy over the Highwood Generating Station and its future, questions about Electric City’s long-term financial stability, uncertainty over the implications of House Bill 25 and considerable negative public comment lead me to believe that the time isn’t right to pursue this alternative. I’ve spoken with John Lawton and Colleen Balzarini of Great Falls; they understand my concerns..."

[Emphasis Added]

Helena Bid

Electric City Power made a pitch to become the City of Helena's electrical supplier.

The City of Helena was, apparently, unimpressed.

“I think the future is very tenuous,” Commissioner Alan Peura said. "Environmentally, I have no intention in hitching our wagons to clean coal.”

Wind...or windy?

The Tribune had an article yesterday about wind vs. coal power. Unlike some commenters, I thought the article was well-balanced and, within the constraints the reporter (or his editor) placed on the piece, he presented both sides.

If I have a criticism of the article, and of course I do (!), the criticism concerns the things the article does not say, or even seem to consider. First, though, let's keep this whole wind power debate in perspective.

How? Start with one reality: the City of Great Falls has no need for a 250 MW plant on its doorstep. In other words, the citizens of this fine community will not be getting their power from this plant, and the needs of the City Government and its bigger, local customers are 16-20 MW. It's fairly disingenuous, then, to approach the wind issue from standpoint of the ability or inability to provide 250 MW of power. Frankly, that is not our problem. It is the problem of SME and its cooperatives. In other words, I don't see the good folks down in Red Lodge bending over backward to build a coal-fired plant in their backyard in order to bail Great Falls out of its power problems.

So, when we consider the "firming" problem mentioned in the article, let's take a relatively simplistic analysis. Let's assume we build a small 40 MW wind farm. When that wind is really cooking out east of town (which, unfortunately, is most of the damn time!), we'll sell that extra 20MW into the Northwest Power grid at spot prices, whatever we can get. Then when the City needs power and the wind isn't blowing, we can use the credits from those sales to 'firm' our supply. Now, I admit that this could work out or not. That's what happens when we try to predict the future. But it doesn't involve our assuming the smoke for a bunch of non-residents, and it doesn't involve our buying into a $720 million dollar investment.

Is that a good analysis or a bad one? I don't really know. I am not an expert. But I did thunk it up in all of about 5 minutes. So don't tell me that there aren't about 10,000 alternatives out there when our demand is but a minuscule portion of this whole project. The idea that we're somehow 'forced' into this rock and a hard place situation is post-decision spin by the the decision-makers.

Now, how about the article?

"Lawton called the claim "ridiculous," saying the price of wind power has risen since 2005, when NorthWestern Energy agreed to buy wind power from Judith Gap for 20 years at about $31 a megawatt hour....

Lawton said the city would be happy to snap up wind power at the old price.

'Will they sell it to us now for $42?' Lawton asked."

The follow-up to this little exchange is an easy one. Ok, Mr. Lawton. There was $31.00 a MWh power available on a 20-year contract back in 2005. Those individuals in charge of making decisions for our city utility, Electric City Power, certainly did not clamor to buy that power, and that price looks pretty good right now, doesn't it? What does that tell us about these individuals' ability to predict the future?

Now we have those same individuals still in charge, and they are predicting the future to this date. Tell me, based on past history, why we should give credence to these predictions? This seems to be the common pattern with City issues: Very Short Memories. VSM disease accounts for the fact that City Administration has struggled with numerous issues (golf courses, water park, Explore! The Big Sky) yet no one seems real skeptical of the "Next Big Thing."

The article goes on to quote Mr. Lawton as stating that the "added the city plans to continue to pursue owning 15 percent of the coal-fired plant." Oh, really? Pursue? Oh, yeah, that's right. We don't have a say in it. SME tells us what we get.

I thought the City was going to own 25 percent of the plant. We have been contributing 25 percent of the start up costs, right? Doesn't this seem like a really good chance for the reporter to explore that whole issue with Mr. Lawton? How does our ownership change when our investment doesn't? Doesn't this really highlight the need for a contract with SME? Should such a contract not be our top priority?

Fortunately for the reader, I do not have time to go through the article in any more detail. I think Mr. Ecke was balanced, but I sure would like to see a bit (or a lot) more skepticism from the Tribune about the statements made by City officials. Do they not allow follow-up questions?

Jobs

Anyone else see this letter to the editor in the Tribune today:

Coal plant needed
My name is Jeff Legg. My wife and I are both Great Falls natives. I am a plumber/pipe fit­ter and a member of UA Local 41. Being a union plumber, I have had to travel to other areas to work because union work in Great Falls is almost nonexistent. I have spent years leaving my family on Sundays and coming home Fridays, missing out on much of my family life. When I first heard about the Highwood project, I almost felt reborn, thinking of all the great things this project could provide my family and me. The morning the big record of decision came out in the Tribune reporting that the funding was still up in the air and the county zoning rescinded; I gave up hope and moved my family to Belgrade where I am working now.

My family and I would love to come home to Great Falls. With­out the opportunities offered by the Highwood Generating Sta­tion, it will be tough. Great Falls needs the Highwood Generating Station. We need to do whatever we can to assure this project does not turn into another “ethanol plant.” The environmen­tal lobby has continually demon­strated that compromise has never been a part of their agen­da. We need to succeed in spite of all the environmentalists like the Cheryl Reicherts and Stuart Lewins. (No offense). This is not only a fight for a good idea and something Great Falls truly needs; it is a fight for common sense.
— Jeff Legg, Belgrade

I am wondering whether anyone thought his approach is persuasive. In other words, "My name is Gee Guy, and we should build a coal plant because it would be a good thing for me." I don't fault the guy for wanting work to support his family, and he sounds like an earnest and hardworking gent.

But I don't think the personal approach is very persuasive. Perhaps the media has worn us down over the years ("Meet Linda O'brien, she doesn't have health insurance..." or "Juan Carlos opposes the illegal immigration bill because he thinks he has only one chance to get his family here from Guatemala...").

Personally, I hope that the environmental groups keep suing over the coal plant. I have a kid who is going to need a car in a couple years, and if they keep suing, sooner or later I'll get in on that and make some money to buy that car..."

Convinced?

Rumor Alert

I heard a rumor, albeit from a pretty good source.

Apparently, SME had some additional cooperative members who for various reasons did not want to be involved in the Highwood Generating Station coal plant.

Apparently, for whatever reason, litigation ensued after SME and these cooperatives split the sheets.

Apparently during this litigation there were some very pointed allegations about SME and its business practices.

Apparently the parties to this litigation attended a settlement conference not too long ago; I don't know if the case settled.

It seems to me that if someone were willing to put in the legwork, one might be able to locate the details surrounding all of this. It would seem that one might find out some interesting information.

It would seem to me that it might also be interesting to know just what, if anything, Electric City Power knows about all this.

Rumors!

No Contract

I have long lamented the fact that we have no contract to protect the City of Great Falls' interests in this coal plant matter.

To me, as a lawyer, the reasons why we need a written contract are obvious. To a layperson, though, such reasons might be less obvious.

Here's an example: In a City Commission meeting on December 19, 2006, Commissioner Sandy Hinz asked staff to explain their request to spend $78,000.00 on a consultant to study the Highwood Generating Station Coal Plant. In response, the City Manager stated that, "in order for the City to secure 25 percent of the Highwood Generating Station’s output, the City was required to finance 25 percent of the costs to construct the facility."

Secure. Interesting choice of words. (By the way, our City Manager did not object to the characterization of his statement in the next meeting's minutes.) Secure means assured, or free from risk.

If we are paying 25% of SME's development costs in order to "secure" or assure that we end up with 25% of the power, that would make sense, wouldn't it? You see, in a contract situation, one gives up something, consideration, in exchange for the other person's consideration. Often it is something as simple as my making a promise to do or not do something in exchange for you making a promise to do or not do something.

For example, the City of Great Falls will pay 25% of SME's development costs in exchange for SME's promise that we will get 25% of the power from the Highwood Generating Station. It makes sense, right? No one gets something for nothing, right? Tit for tat...and all that.

Wait a minute, though. What's that? Now we don't get 25%, we get 15%? (Or here, or here.)

Buh...buh...buh...buh...but...but. But why does one side get to just change their promise, and the other side gets nothing in return?

Why would the City of Great Falls agree to tie up $1,400,000.00 in "security" for SME's benefit when it has no legal obligation to do so? And, we get nothing in exchange. Are we secretly indebted to SME, to these co-ops from elsewhere in Montana?

"The city has very significant leverage points in dealing with SME," according to the City Manager. Are we negotiating with SME as though we have leverage points with them?

What the heck is going on here? Isn't there one single person who will look out for the City's interests?

The City can still go forward with the coal plant, if the Commission thinks it's a good thing. But when these issues come up, why must our elected officials and hired administrators simply roll over? Some of these people have been in business before, or still are. Would they not sharpen their pencils a bit if it was their own business, their own money?

I guess I am just a crackpot.

Why, why, why...

Let's assume you are a businessman, and you entered into a contract with a supplier to sell you widgets. You carefully considered this supplier's price for widgets and the payment terms. Finally, you entered into a contract with your supplier to buy a certain number of widgets every month for a certain price.

A couple years later, you wanted more widgets, so you negotiated to buy more widgets from your supplier, and signed a written Addendum. A year after that, you negotiated for even more widgets, and you entered into another Addendum to the first contract to buy the widgets at a fixed price for the next 10 years. Throughout this time period the payment terms remained the same. The widget manufacturer sent you a bill for the widgets, and you paid him in full within 10 days of receiving the bill.

Now mind you, you weren't getting any sort of special deal on the widgets. You were basically paying market price for widgets, but for purposes of convenience and continuity you stuck with this supplier. You could get the widgets for a set price for a set period of time. You had a binding legal contract. You performed. He performed.

One day he comes to you and says he has decided that you now need to give him a deposit on your widget orders. Your 10 day payments are insufficient. In fact, he wants you to deposit the cost of two months of widget orders in an account so he can feel secure. Now this is no small order; you checked your records and two months of widget orders is 1.4 MILLION dollars. That's an awful lot of money to have tied up in an account so a guy you have paid faithfully for years can feel "secure."

You go to your attorney. He tells you that you have a legally enforceable contract without any obligation to put up a security deposit. He tells you that a term of this importance should have been negotiated in advance, not after the fact. He asks whether your supplier has any unusual leverage over you outside of the terms of the contract. When you reply that he does not, your attorney suggests that you ever so politely tell your supplier to pound sand.

While that 1.4 million dollars belongs to you, it is important to other people, such as your employees and your family. You do the responsible thing and inform the supplier that, as much as you like his widgets, you are going to simply perform the agreement that is negotiated. In the alternative, if he really, really needs the security deposit, you might be willing to consider it if he will sweeten the pot in some other way, perhaps with a better rate on widgets. This is, after all, a contractual business relationship, not a friendship where we expect favors and gifts.

Right?

Incredibly, if we are discussing City government, this is wrong. In City government, with our money, it is easy to do favors. Because that is exactly what the City proposes to do tomorrow night. Our City Manager is asking the City Commission to give what is essentially a gift promise to SME. He is asking your Commissioners to do something that they have no obligation to do in order to benefit the members of electrical cooperatives from Billings, Bozeman, and elsewhere in Southern Montana.

How, you ask? It's not so hard to follow.

On September 29, 2004, SME and the City entered into a Wholesale Power Contract. That contract says the following about payment for power: "Southern Montana shall read or cause to be read each meter on approximately the same date each month. Electric energy and related services furnished hereunder shall be paid for by the member at the offices of Southern Montana monthly within ten (10) days after the bill therefore [sic] is mailed to the Member. If the Member shall fail to pay any such bill within such ten-day period, Southern Montana may discontinue delivery of electric energy and related services hereunder upon fifteen (15) days' written notice to the Member of its intention to do so." Nothing in the Contract requires the City to put up two months' billings as a deposit.

The City and SME entered a later agreement, and two separate addendums (here and here). Nothing in these agreements create in the City an obligation to put up a security deposit.

Yet tomorrow night our City Manager is asking the City Commission to agree to do just that. Why in the world would the City agree to tie up 1.4 MILLION dollars of its money when it has no legal obligation to do so? Just what, pray tell, is SME doing for us in exchange?

Contracts are not friendships. They create binding relationships based on mutual promises. You get what you negotiate, no more, no less. You don't give things away to be "nice," especially when it is someone else's money (like the taxpayers'). (Imagine if you bought a car, and a year later the dealer tried to raise the price.)

The City Manager will claim that the security deposit is a "standard business practice in the energy industry." If so, why was it never negotiated before now? Are Electric City Power's customers going to pony up their two months security deposit to us?

It doesn't matter if it's standard business practice. They didn't negotiate it. It's too late to sweeten their own pot now!

Is there anyone on our City Commission who can stand up for the taxpayers of Great Falls? Won't someone on the Commission at least ask the questions:

1. Do we have any legal obligation whatsoever to agree to put up a security deposit?
2. If not, why would we ever agree to do it? What exactly do the taxpayers get in return?
3. Why, all of a sudden, is SME having cash flow problems?
4. If this is a "standard business practice," have all of Electric City Power's customers agreed to make corresponding security deposits?
5. If we're just doing this to help out SME, can we expect them to release us from the Water Service Agreement if we change our minds?

Why is our community trying so damn hard to make life easier for electrical customers in Billings, Bozeman and the rest of Southern Montana?