Electrical shock: Public Service Commission denies BBI’s bid
Montana’s Public Service Commission (PSC) sent shockwaves through the international utility and finance community this week when all five members voted unanimously to deny Australian investment firm Babcock & Brown Infrastructure’s (BBI) bid to purchase NorthWestern Energy (NWE), the state’s default electricity supplier, for $2.2 billion. In the age of globalization, where mega-corporations and holding companies routinely skim the cream off the top, the rejection of the buyout is an anomaly, to be sure. Then again, given the shocks Montanans have suffered due to an ill-advised move to deregulate utilities under Gov. Marc Racicot a decade ago, perhaps we have finally learned our lesson about trusting Enron-style corporate morals with our future.
Most Montanans have no idea what the PSC does or who sits on it—even though we voted them into office from the five separate districts they represent. This commission is different because all of its members are former legislators. Commission Chairman Greg Jergeson, a Democrat, represents the Hi-Line and was a senator for 20 years. Commission Vice-Chair Doug Mood is a Seeley Lake Republican and former Speaker of the House. Commissioner Bob Raney, a Democrat, served in the House for 16 years and represents the Butte-Bozeman-Livingston area. Commissioner Brad Molnar, a Billings-area Republican, served multiple terms in the House. Ken Toole, the newest member of the commission, is a Helena Democrat and former senator.
What makes this particular commission even more distinctive—and perhaps explains part of the reasoning behind its vote on the acquisition—is that all members except Toole were in the Legislature when utility deregulation was adopted in 1997. They heard the rosy projections of how the competition was supposed bring down electricity prices. But given the reality that followed, in which virtually no competition arose and Montana’s rock-bottom electricity prices suddenly skyrocketed, it’s fair to say these guys are extremely wary about big promises from utility companies these days—especially considering what was at stake.
“It seemed [the offer] was mostly what BBI could do, rather than what it would do,” commissioner Bob Raney said. “What we got was a lot of words such as ‘commitment,’ ‘encourage,’ ‘foster,’ ‘ability,’ ‘pledge,’ ‘can,’ ‘should,’ ‘propose,’ ‘plan,’ ‘expect’ and ‘et cetera.’ These words don’t mean a thing to Montana ratepayers who have been through this most difficult of 10 years and seen what has happened to electricity in Montana. I think it’s very disingenuous to have approached Montanans in this manner.”
Raney’s sentiments were echoed by fellow commissioner Mood, who made the motion to reject the acquisition: “I think there is considerable chance that significant harm will come to the company as a result of what they have in mind. It will inhibit the ability to provide services at just and reasonable rates.”
And what, exactly, did BBI have in mind? Well, as commissioner Molnar pointed out, the Australian firm planned to funnel about $200 million in tax gains accrued by NorthWestern Energy during its recent bankruptcy to its investors. That BBI is a foreign firm didn’t figure into his decision, Molnar says, but he noted that the tax money “belongs to the people of Montana.”
For some, however, the question of how Babcock & Brown, BBI’s parent company, has handled international financial dealings did make a difference. Jackie Corr, a citizen who testified at the Butte public hearing on the acquisition, produced a stunning and rather disturbing picture of the company’s business practices, including tax shelters, off-shore banking, massive bonuses for corporate executives, a $135 million IRS penalty for failing to register tax shelters and a team of powerful lobbyists in Washington who have so far been successful in their efforts to derail Congressional efforts to shut down those tax shelters. And while Corr’s investigations have certainly opened some eyes to the potential for a less than satisfactory outcome to the acquisition, he is not by any means alone in his opposition. Virtually all the testimony the Commission received in its statewide public hearings opposed the sale.
What is noteworthy and commendable in the actions of Montana’s PSC is the example it sets for other politicians in the state. Although the commission is split with three Democrats and two Republicans, they all voted against the acquisition. Working together to protect the interests of Montanans is something that has seemed increasingly rare these days, especially in light of the debacle of the 2007 Legislature. Considering these are all former legislators, perhaps there is both a lesson and an example that current legislators and the governor should take to heart.
Speaking of the governor, Brian Schweitzer had this to offer on the PSC’s decision: “This is a vote that says ‘Pack your bags and ride a kangaroo, because you’re not going to be in Montana.’” Perhaps, had Schweitzer actually been involved in the process, he would have known that kangaroos had nothing to do with the PSC’s decision and that it was based on the potentially serious financial risk that could accrue to Montana’s beleaguered ratepayers. But, as noted by the Billings Gazette: “The Schweitzer administration has taken no public position on one of the biggest economic and energy issues facing the state: Whether an Australian firm, Babcock & Brown Infrastructure, should be allowed to buy NorthWestern, the state’s largest electric-and-gas utility. The case has been before the Public Service Commission for nearly a year, but the administration is not a party in the case and has no official presence at the proceeding.”
It should be clear that the hard work and leadership on this incredibly important decision came from the five PSC commissioners themselves. When asked what comes next, Jergeson said NorthWestern Energy “should continue to operate as a stand-alone utility. We believe Montana ratepayers will be better served by that model.”
It’s about time Montana ratepayers were “better served,” and we should all be thankful for the PSC’s truly bipartisan effort to do so.
Helena’s George Ochenski rattles the cage of the political establishment as a political analyst for the Independent. Contact Ochenski at email@example.com.