Power Struggle 

The man behind energy deregulation and the woman who wants to unseat him

Say what you will about Sen. Fred Thomas’ sponsorship of the energy deregulation bill—and his political opponent is saying plenty—but you’ve got to admit one thing: In the three years since Senate Bill 390 became law, Thomas has mastered the language that goes with this complex legislation. These days, Thomas tosses off phrases like “stranded costs” and “Universal Systems Benefit Charge,” and makes it sound like he knows what he’s talking about.

That’s a change from the Sen. Fred Thomas of 1997, when the Republican legislator sounded as mystified about Senate Bill 390 as most of his fellow Montanans sound today.

If Thomas does indeed sound knowledgeable about SB 390, he’s in a small minority.

Thomas, an insurance salesman from Stevensville, is the popular Republican legislator representing Senate District 31 in Ravalli County’s north end. He is challenged by Democrat Lisa Thompson, a political newcomer, also of Stevensville. She was prompted to run for the state senate post chiefly because of Thomas’s sponsorship of SB 390.

“There were three issues that prompted me to get into the race,” Thompson says, “deregulation, [Republican attempts at] busting the coal tax, and refusing to have a special session to deal with economic issues.”

With two of the issues already history, that left deregulation as Thompson’s main focus in her effort to defeat Thomas.

Deregulating the energy monopoly enjoyed by the Montana Power Co., is “the worst piece of legislation brought up in years,” Thompson says bluntly. And it was “rammed through” the 1997 legislative session in two weeks with neither full public participation nor thorough public review.

A one-page flyer being circulated with Thompson’s political brochures is just as succinct and carries a hint of anger. After listing the so-far sorry history of SB 390, it states in big, bold capital letters: “You can thank Fred Thomas!”

Thompson wastes no time herself thanking Thomas. Rather, she places the blame for a mine shutdown squarely on him.

The first to feel the effects of energy deregulation was Montana Resources, Inc., a Butte copper and molybdenum mine, which last July laid off its 350 workers, when the company could not afford the electricity it was forced to buy on the open market.

According to Thompson, the mine is still idle, though 111 workers have been put back to work on maintenance.

“The mine has not restarted its turbines,” she says. “Things are still silent, people are still struggling, and Thanksgiving and Christmas are coming.”

Individual ratepayers will get their first bitter taste of energy deregulation in July 2002, she says. That’s when Montana Power, as we know it, will cease to exist as an electrical and natural gas supplier, forcing Montana customers to pick new suppliers. But as Thompson points out, there are no competitors on the horizon. And the Public Service Commission (PSC) has not yet selected a “default” supplier for those customers who are either too bewildered or disinterested to choose their own.

“There are no competitors at your door,” she says. And if competition does emerge, she warns Montanans to expect energy rates to double or even triple, as residents of San Diego experienced last summer when deregulation went into effect there.

Thompson is also angry at Montana Power for refusing to sell its generating plants to an entity called the Montana Electricity Buying Co-op, and instead selling to PP&L, an out-of-state firm. That now puts the Montana-based generating plants under the auspices of interstate commerce, which means the industry cannot be re-regulated, as some impacted industries have suggested.

“That makes it more difficult to fix,” she says.

About the only point that Thompson and Thomas agree on is that the energy deregulation bill will surface in the 2001 legislative session. Thompson believes the 2001 Legislature will have to fix the bill, while Thomas thinks lawmakers will merely pass supporting legislation to boost the supply of wind, natural gas and coal-powered generating plants.

SB 390, Thomas says, was written by the state’s electrical co-ops, the Racicot administration, the Natural Resource Defense Council, Montana’s representatives to the Northwest Power Planning Council, and the “investor-owned utilities.” It was a well-put-together and well-reviewed piece of legislation, Thomas says, that he was asked to sponsor in the Legislature.

But to Thompson and other critics of SB 390, Montana Power was a legal monopoly with profits guaranteed by the PSC. Shouldn’t the profits from the sale of its generating plants and distribution system have gone back to Montanans, rather than to corporate heads in Butte?

They did, according to Thomas. He says that ratepayers have gotten money from the sale of the generating plants in the form of a PSC-approved rate reduction. And the PSC, he says, used some of the profits from that sale to pay off some of the “stranded costs”—money that Montana Power was mandated to pay, as a regulated industry, to build generating plants to assure a continuous supply of cheap power.

In fact, as Thomas sees it, the problem surrounding energy deregulation is one of supply—and failure to plan ahead.

Last July’s energy price spikes that shut down Montana Resources, Inc., were not the result of free market capitalism, he says, but were caused by a severe drought and a heat wave in California which, combined, put pressure on the power grid. If industry, like the two dozen or so electrical co-ops in Montana, had contracted for power over the long-term, it would have been locked into lower electrical prices. “They were, in essence, buying the power from the wrong place,” he says of the Butte mine.

Thompson believes that the free market did indeed play a part in the mine shutdown. Montana, she says, already produces more power than it needs, but sells 40 to 60 percent of that power out-of-state to the highest bidder. She worries that Montana, with its sparse population, will be overlooked as an insignificant player when full deregulation comes to pass in less than two years.

Thomas puts his faith in the free market—and in Montana’s vast, largely untapped coal reserves. “There’s a couple thousand years of coal in Montana that’s low sulfur,” he says. Near Roundup, for instance, there is a mine containing coal that is not only low in sulfur, but high in BTU, or British Thermal Units, a method of measuring heat.

Deregulation will likely prompt the mine’s owners to re-open the mine, which was shut down as a result of the state’s high coal severance tax. The Legislature cut that tax in the mid-1980s to 17.5 percent. That tax cut, together with the deregulation of the energy business, should make coal mining more attractive, he says. “It makes coal more competitive on the market.”

Thomas also would streamline the regulatory process for siting wind, natural gas and coal plants as a way of not only giving Montana a competitive edge in free market energy, but also as a means of creating jobs.

Thompson believes the state should consider buying the generating plants from PP&L to assure continued low energy prices, even though the purchase price would be unimaginable for a state with less than 1 million people. But when balanced against what she believes will be soaring energy rates, in the long run, it may prove to be economical. “We’re going to have to pay higher rates anyway,” she says. But she admits that state ownership is a long shot. “They [PP&L] just have us on a string.”

Both Thompson and Thomas agree on another point: Built into SB 390 was a clause which allows legislators to extend the July 2002 transition period by another two years. That would give lawmakers another shot at guaranteeing low energy prices for Montanans. The problem with extending the transition, as both point out, is that it does not include a freeze on rates.

While that provision is further proof to Thompson that the people of Montana were the last to be considered in the drafting of SB 390, Thomas is not convinced rates will rise, nor that SB 390 is in need of a “fix.”

Claims that rates will double are “scare tactics,” he says. Between 66 and 70 percent of the ratepayer’s bill—the percentage charged for “poles and wires”—will remain regulated, he says. Only supply has been deregulated. “The doubling thing is rhetoric from somewhere. It’s not on the charts. It’s not in the ballgame,” says Thomas.

Thompson is convinced that the 1997 Legislature got into the deregulation business too soon, and that it will be up to the 2001 Legislature to fix a bad bill. “It was not the pool for us to jump into, but we did. It was a major political mistake. A major political mistake.” It’s a mistake that will hurt Thomas at the polls, she believes. “When Republicans tell me they’re going to vote for me, Fred has made enemies. When you work that hard for a corporation and leave the people hanging, you make a lot of enemies.” tomers to pick new suppliers. But as Thompson points out, there are no competitors on the horizon. And the Public Service Commission (PSC) has not yet selected a “default” supplier for those customers who are either too bewildered or disinterested to choose their own. “There are no competitors at your door,” she says. And if competition does emerge, she warns Montanans to expect energy rates to double or even triple, as residents of San Diego experienced last summer when deregulation went into effect there. Thompson is also angry at Montana Power for refusing to sell its generating plants to an entity called the Montana Electricity Buying Co-op, and instead selling to PP&L, an out-of-state firm. That now puts the Montana-based generating plants under the auspices of interstate commerce, which means the industry cannot be re-regulated, as some impacted industries have suggested. “That makes it more difficult to fix,” she says. About the only point that Thompson and Thomas agree on is that the energy deregulation bill will surface in the 2001 legislative session. Thompson believes the 2001 Legislature will have to fix the bill, while Thomas thinks lawmakers will merely pass supporting legislation to boost the supply of wind, natural gas and coal-powered generating plants. SB 390, Thomas says, was written by the state’s electrical co-ops, the Racicot administration, the Natural Resource Defense Council, Montana’s representatives to the Northwest Power Planning Council, and the “investor-owned utilities.” It was a well-put-together and well-reviewed piece of legislation, Thomas says, that he was asked to sponsor in the Legislature. But to Thompson and other critics of SB 390, Montana Power was a legal monopoly with profits guaranteed by the PSC. Shouldn’t the profits from the sale of its generating plants and distribution system have gone back to Montanans, rather than to corporate heads in Butte? They did, according to Thomas. He says that ratepayers have gotten money from the sale of the generating plants in the form of a PSC-approved rate reduction. And the PSC, he says, used some of the profits from that sale to pay off some of the “stranded costs”—money that Montana Power was mandated to pay, as a regulated industry, to build generating plants to assure a continuous supply of cheap power. In fact, as Thomas sees it, the problem surrounding energy deregulation is one of supply—and failure to plan ahead. Last July’s energy price spikes that shut down Montana Resources, Inc., were not the result of free market capitalism, he says, but were caused by a severe drought and a heat wave in California which, combined, put pressure on the power grid. If industry, like the two dozen or so electrical co-ops in Montana, had contracted for power over the long-term, it would have been locked in to lower electrical prices. “They were, in essence, buying the power from the wrong place,” he says of the Butte mine. Thompson believes that the free market did indeed play a part in the mine shutdown. Montana, she says, already produces more power than it needs, but sells 40 to 60 percent of that power out-of-state to the highest bidder. She worries that Montana, with its sparse population, will be overlooked as an insignificant player when full deregulation comes to pass in less than two years. Thomas puts his faith in the free market—and in Montana’s vast, largely untapped coal reserves. “There’s a couple thousand years of coal in Montana that’s low sulfur,” he says. Near Roundup, for instance, there is a mine containing coal that is not only low in sulfur, but high in BTU, or British Thermal Units, a method of measuring heat. Deregulation will likely prompt the mine’s owners to re-open the mine, which was shut down as a result of the state’s high coal severance tax. The Legislature cut that tax in the mid-1980s to 17.5 percent. That tax cut, together with the deregulation of the energy business, should make coal mining more attractive, he says. “It makes coal more competitive on the market.” Thomas also would streamline the regulatory process for siting wind, natural gas and coal plants as a way of not only giving Montana a competitive edge in free market energy, but also as a means of creating jobs. Thompson believes the state should consider buying the generating plants from PP&L to assure continued low energy prices, even though the purchase price would be unimaginable for a state with less than 1 million people. But when balanced against what she believes will be soaring energy rates, in the long run, it may prove to be economical. “We’re going to have to pay higher rates anyway,” she says. But she admits that state ownership is a long shot. “They [PP&L] just have us on a string.” Both Thompson and Thomas also agree on another point: Built into SB 390 was a clause which allows legislators to extend the July 2002 transition period by another two years. That would give lawmakers another shot at guaranteeing low energy prices for Montanans. The problem with extending the transition, as both point out, is that it does not include a freeze on rates. While that provision is further proof to Thompson that the people of Montana were the last to be considered in the drafting of SB 390, Thomas is not convinced rates will rise, nor that SB 390 is in need of a “fix.” Claims that rates will double are “scare tactics,” he says. Between 66 and 70 percent of the ratepayer’s bill—the percentage charged for “poles and wires”—will remain regulated, he says. Only supply has been deregulated. “The doubling thing is rhetoric from somewhere. It’s not on the charts. It’s not in the ballgame,” says Thomas. Thompson is convinced that the 1997 Legislature got into the deregulation business too soon, and that it will be up to the 2001 Legislature to fix a bad bill. “It was not the pool for us to jump into, but we did. It was a major political mistake. A major political mistake.” It’s a mistake that will hurt Thomas at the polls, she believes. “When Republicans tell me they’re going to vote for me, Fred has made enemies. When you work that hard for a corporation and leave the people hanging, you make a lot of enemies.”

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