Ochenski: Contract hits 

Damning news on power, pollution and politics

Power, pollution, and politics play key roles in two surprising developments on the state and national level. A damning report by the staff of the Montana Public Service Commission (PSC) urged the Commission to reject the default power supply portfolio assembled by NorthWestern Energy (NWE), now responsible for serving 300,000 former Montana Power Company (MPC) customers. Meanwhile, in the nation’s capital, the U.S. Environmental Protection Agency (EPA) just released a “Climate Action Report” that contradicts previous statements by the Bush administration on the causes of global warming and puts the blame squarely on the pollution caused by the burning of fossil fuels. In Montana, the PSC followed the suggestions of their staff. Whether Bush will do the same remains a pregnant, politically- charged question.

The extensive PSC report (available at www.psc.state.mt.us) was issued by the agency’s attorneys and utility specialists and unequivocally slammed most of the contracts for new power generation projects assembled by NWE because they failed to meet industry standards for procurement and didn’t provide enough information to allow a credible assessment of feasibility and costs. The report didn’t just overturn the apple cart of the default portfolio, it poured on the gasoline and torched it.

Throughout the lengthy process to procure our future electricity supply there have been assertions that many of the proposed energy projects were speculative enterprises seeking to use acceptance in the energy portfolio as leverage for financing and construction. While NWE and MPC assured the Commission that they took great diligence in selecting the suppliers, the staff report bluntly contradicted that position: “…[I]t is not clear that company management had fully committed to the task of assembling the default portfolio…but considers it the burden of the Commission to qualify or vet these projects. It is up to the company, as the default supplier, to document, support and clearly demonstrate that it has made its best judgments all the way through the procurement process, and the company has not done so.”

The Montana Wind Harness (MWH) proposal is a classic example. Former MPC executives Jack Haffey and Bill Pascoe “were the primary decision makers for the portfolio…but there is little information regarding the process they went through to arrive at the MWH decision. When asked about the involvement of many of the MWH principals, Mr. Pascoe was somewhat uninformed as to the status of the principals. It is uncertain whether MPC/NWE conducted any research into the question of if the principals listed in the MWH proposals were in fact principals. Testimony by Mr. Pascoe leads staff to believe that there was no verification of the principals with regard to their participation in the project.” As one example, the report cites a letter from Montana Audubon denying its involvement in the project after finding itself included in the MWH proposal. The report quipped: “It appears MWH took liberties with the inclusion of ‘associates.’”

Nor did the PSC staff have much praise for the politically-tainted process that awarded the entire wind power contract to MWH. “It appears that the personnel that ultimately made the determinations…selected a company that had at best a sketchy background, no experience, but was ‘very well connected politically.’ Though Mr. Pascoe stated that their staff was being ‘a little lighthearted,’ it appears there was substantial weight given to the ‘political muscle’ of MWH.” Since neither the promised jobs nor financing had been procured by MWH at the time of the hearing, the staff wrote: “MPC/NWE believes that the risk associated with the non-performance or non-delivery of the product is borne by the ratepayers. This may be prudent for MPC/NWE but is not prudent for the ratepayers of Montana.”

The report was equally frank about a proposed gas-fired power plant that would be operated by one of NWE’s corporate affiliates. Critics contend it is a sweetheart deal for the utility. The staff report questions the “affiliated interest,” the market cost of the gas to run the plant, and the concern that “the merchant plant’s operation could be subsidized by default customers.”

With the clock ticking down to July 1—when the rate caps come off for former MPC customers—the report has torpedoed the portfolio approval many saw as a done deal. In the past, what the power company wanted, the power company got…and we paid for it all. But without the approval of the PSC, it is likely that many of the new power plants will never be built, since it will be impossible to assure financiers of a captive consumer base (us) committed to foot the bill for “full-cost recovery” of their investment (and profit!).

In yet another welcome move, the Commission voted to mandate that conservation, heretofore totally absent from the portfolio, be equally considered. Without question, conservation is the cheapest “new power” available, and early estimates put Montana at 100 megawatts of conservation potential—about the same as the proposed new gas-fired generation plant.

Politically, this plays out great—at least for the majority Republican members of the PSC. Since the Commission did NOT pre-approve the portfolio, they can dodge the blame for assured, quantifiable electricity cost increases—at least for now. Once past November, they can consider the “full cost recovery” questions at their post-election leisure.

The new EPA global warming report (www.epa.gov/globalwarming/-publications/car/) is vastly more terrifying than the PSC’s. Yet, to actually do something about the climate-threatening problems, Bush will have to stand up to some of his most ardent supp- orters—the industrial polluters and the massive energy cartel. On its cover the report has a year-old Bush quote: “My administration is committed to a leadership role on the issue of climate change. We recognize our responsibility, and we will meet it—at home, in our hemisphere, and in the world.”

Maybe so. But I’m betting that even when faced with the grim evidence connecting fossil fuel burning to global warming, Bush doesn’t have the cajones to follow the Montana PSC’s example when it comes to power, pollution and politics.

When not lobbying the Montana Legislature, George Ochenski is rattling the cage of the political establishment as a political analyst for the Missoula Independent.

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