A lesson learned: Revised BBI bid shows the value of standing firm
When Montana’s Public Service Commission (PSC) unanimously voted against the acquisition of NorthWestern Energy (NWE) by the Australian corporation Babcock-Brown Infrastructure (BBI) last month, many breathed a sigh of relief. Others, notably Republicans, chastised the PSC for sending a bad message to those who may want to do business in Montana. This week, BBI returned to the PSC with a revised offer that’s considerably more beneficial to Montanans, blowing the “bad business climate” rhetoric out of the water and providing a dramatic lesson in the benefits of fighting for Montana instead of giving it away.
The reasons offered by both Republican and Democratic PSC members for their initial rejection of BBI’s takeover bid focused on what appeared to be troubling avenues that could siphon funds out of NorthWestern and further erode Montana’s troubled energy landscape. Besides being foreign-owned, BBI is heavily involved in a variety of financial ventures including offshore banking and hedge funds that indicated the mega-corporation might just be picking Montana’s low-hanging utility fruit, not tending to the health and well-being of the state. Plus, BBI’s amorphous promises just didn’t give the PSC’s commissioners much in the way of comfort and security that everything—or anything—the corporation promised would actually get done.
Having obviously learned a few things from the unanimous rejection, BBI has now returned to the PSC with a new offer that’s quite a bit more definitive than its predecessor, and vastly more concerned with ratepayers. “It’s big news,” said PSC Commissioner Bob Raney. “We will most certainly consider what they brought to us, especially since it is so different from the original application.”
The new proposal, which Raney dubbed “a major revision,” makes some hard-core commitments and sticks some very real numbers on them. For instance, BBI says it will invest at least $380 million in NorthWestern Energy for maintaining and enhancing the existing utility assets, a move that those familiar with the formerly bankrupt company, which is the default supplier of utilities to more than 300,000 Montana homes and businesses, say is vitally necessary.
Plus, in a move that weakens the financial stranglehold Pennsylvania Power and Light (PPL) maintains on Montana ratepayers after its purchase of the former Montana Power Company dams, BBI commits another $200 million to developing its own regulated power sources over the next five years. The key word here is “regulated,” which will require that the company charge Montanans only what the PSC will allow. In the old days prior to deregulation, that was cost of production plus about 10 percent profit, which gave Montanans the sixth-cheapest electricity in the nation and maintained the former Montana Power Company as a very healthy business for nearly a century.
Our beleaguered ratepayers, who are now being smacked with the highest electricity costs in the region, just might find some comfort in BBI’s promise of a one-time $20 million credit to ratepayers that will be applied as directed by the PSC. Add to that a pledge not to seek recovery of the acquisition premium or transaction costs through rates, which could have otherwise led to yet another cost increase for Montanans. Another $5.5 million in the three years following the closure of the sale would be used for “targeted economic benefits,” for exploring the feasibility of various alternative energy options, for example. And then there’s the promise to attain 15 percent of their energy from renewable resources in the next five years—three years ahead of the deadline now required by law.
BBI also says it will maintain ownership of NWE for at least 10 years and will expedite the design and construction of an $800 million, 500 kV Mountain States Transmission Intertie from southwest Montana to southeastern Idaho. The Australians say they would establish a “Montana only” utility headquartered in Butte, with a Montana-based management team and a separate board of directors composed “mostly of Montana residents.” You don’t have to be a utilities genius to see that BBI has decidedly upped the benefits for Montana ratepayers in its latest proposal, as well as offered considerably more in the way of long-term security and stability.
For a century Montana politicians have routinely offered companies tax breaks, regulatory “streamlining” and environmental rollbacks in an attempt to foster what has rhetorically been called a “good business climate.” The Anaconda Smelter, for instance, had a decade’s worth of future environmental exemptions from pollution standards when it shut down in 1980, leaving us with the largest Superfund site in the nation. In the mid-’90s, the Republican dominated Legislature literally gutted our water quality and other environmental laws at the behest of the mining industry. The result of that folly will endure as perpetual pollution from open-pit mines all across Montana—pollution that future generations will pay for and struggle to contain long after all the mining jobs vanished.
Now consider the “race to the bottom” approach taken by legislators and the governor’s office in the recent legislative session, where bills to exempt energy facilities from environmental regulation were once again introduced and where substantial tax breaks for energy companies were actually passed into law. Did we really need to go so overboard on the giveaways, exemptions and subsidies—or is it time for our political leaders to get a clue?
Whether or not the PSC changes its mind on the BBI offer is peripheral. The real lesson here is both simple and fundamental: Montanans don’t have to whore out our state to whatever big business comes tromping down the line in search of easy pickings. The PSC, via the radically revised BBI proposal, has just shown us that we can stand tall, demand protection of our environment, full payment of taxes, and benefits for Montanans as conditions of doing business here—or we can continue the failed model of giving it all away for a piddling handful of promised jobs.
Helena’s George Ochenski rattles the cage of the political establishment as a political analyst for the Independent. Contact Ochenski at email@example.com.