BEC votes to approve plan
By Eleanor Guerrero
Carbon County News
June 5, 2014
On Wednesday, May 28, the federal judge in the Southern Montana Electric Transmission and Generation Cooperative, Inc. (Southern) extended the final hearing on the amended plan from Monday, June 2, to Friday, June 13. Although this gave the members of Southern, including Beartooth Electric Cooperative, Inc. (BEC) more time to seek crucial information before voting, BEC received the responses it needed on Thursday, May 29, and voted to approve the plan.
At the Tuesday, May 27, BEC board meeting board member Arleen Boyd reported that the amended plan: will have the Highwood Generating Station (HGS) placed in trust; will have reduced noteholder debt from $85 million to $21 million; the all-requirements contracts will be in effect only for the term of the four-year note; it will have the right for Southern (with conditions) to determine its power purchase terms and BEC may exit Southern (upon conditions).
Financial Chair Dan Dutton voiced concern should BEC and Southern approve the plan without locking in members’ rates. “If we don’t have a signed contract with fixed rates, BEC could face bankruptcy during that four-year repayment term,” he said. Boyd acknowledged that any failure to repay the loan as agreed regardless of cause could constitute a default.
Even in the best case, Dutton argued, no signed contract setting firm rates would be in hand at the time of voting to approve or disapprove the plan.
Boyd said that in a bankruptcy the plan need only be “feasible’ not guaranteed and that the plan as amended is workable.
Southern’s power supply rate under the new plan is uncertain and the margin is tight. A request had gone out on Monday, May 26, from Southern to possible power suppliers for potential rates. The cost of buying power from a supplier had to be low enough, about 4.5 cents per kWh (kilowatt hour), for Southern to then turn around and charge its members no more than 7 cents per kWh (BEC’s current rate) for up to four years.
Boyd said the benefits are: 1. Power supply options would be open, no longer prescribed; the noteholder loan would be paid off in four years with a defined repayment process; the trust would sell HGS assets; and BEC has an option to exit.
Other risks of the amended plan are: the current operating budget is much higher than necessary; the four year term allows partial payment with a potential for remaining debt; the possibility that HGS will not be sold; that the Southern membership is too small to absorb financial strain; that there has been a history of poor decision making at Southern; and the fact that BEC’s members must approve any decision of BEC to leave Southern.
BEC, according to Boyd, has only received a half Southern budget and needs a full budget.
At the Wednesday meeting Boyd said, “When we can see an expectation of power under the umbrella of repayment then we will support the plan. We don’t have it yet.” Finally, on Thursday, May 29, Boyd stated, responses were received from suppliers indicating rates were possible that would meet the feasibility standard. That same day, Southern met and agreed to go forward in the proposal process. BEC then voted yes on the plan.