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Rural Montana - June 2013

By Arleen Boyd

What comes next in this bankruptcy of Southern Montana Electric Generation and Transmission Cooperative, our wholesale power supplier? We continue, as reported last month, to work toward a reasonable bankruptcy solution that will allow us to exit Southern and dispose of the Highwood Generating Station with the best financial outcome possible.  At the same time we are bringing our power supply due diligence work to the final phase: identifying a business partner ready to provide affordable wholesale power and help us provide the rates, services, and support you have told us you expect.

We know that we can contract independently to buy power at rates that will allow us to deliver affordable electricity reliably.  We are talking with other co-ops and utilities about business relationships that could address our power supply needs and give us the economies of scale we need to reduce, or at least hold steady, your rates over time.  Our financial models help us project the impact on BEC of various levels of debt that may result from the Southern bankruptcy.  We are prepared to leave Southern and meet both power supply and reasonable debt requirements responsibly.  

If, however, the court approves the Southern trustee’s current reorganization plan (posted on our website) nearly two years of due diligence work will be wasted.  We will remain members of Southern forced to own and pay for HGS, a power plant that cannot produce power economically, while we cover operating expenses for a generation and transmission cooperative that is too small and debt ridden to offer the services or security expected from a G&T.  

We are working to keep that plan from being taken forward.  

  • We are participating in discussions with Prudential Finance, the creditor for HGS, to lower Prudential’s claims and ensure that any plan will allow a negotiated exit for Southern’s member systems. 
  • We will participate in the court’s July 29 hearing to value collateral for the HGS loan.  The collateral consists of HGS and the all-requirements contracts between Southern and its member systems. 
  • We are developing potential content and support for an alternative to the trustee’s plan. 
  • We continue to demand information from the trustee, including the investigative report on Southern done by attorney Nancy Temple and Southern’s recently completed audit.  
  • BEC’s legal argument that Southern’s contracts with its member systems cannot be offered as security for the HGS loan because they were not valued as required by law will be heard when confirmation hearings are held.  Our original complaint to void the 2008 contract is not necessary because the trustee has reverted to the 2007 contract as collateral for the HGS loan in his reorganization plan.  The 2008 contract contained many onerous provisions requiring Southern members to be jointly and separately responsible for an expanded list of debts and liabilities including unrecovered accounts receivable.   It allowed for “adjustments” to be charged in addition to rate increases and specifically prohibited the commonly used “used and useful” standard for objections to debt.

It is likely that developments in the bankruptcy will occur unexpectedly and that schedules will change.  We are posting court documents and our reports on the BEC website (  Contact the co-op and trustees for updates.

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