Power on Power 

UM economist sheds light on I-145

The reason the buy-back-the-dams initiative (I-145) seems like a gamble is because it is a gamble. But it’s one that University of Montana economics department chair Tom Power thinks will pay off. Taxpayers Against I-145’s slogan—“It’s a dam risky business”—is a fair appraisal of the situation seeing how there is no guarantee that buying back the dams will lower the price of electricity.

“The reason we don’t know is that we don’t know what the courts will rule the [fair market] value of the dams are,” says Power. “It seems clear that the utilities aren’t going to give up the dams at any reasonable price so then the courts are stuck with the job of figuring out what the far market compensation is.”

While there is disagreement on both sides as to what the dams are worth, Power thinks the $500 million in revenue bonds the state would be authorized to raise if the initiative passed would cover the total costs of the dams. After an analysis of the situation, Power is convinced that the dam-buyback would result in lower power bills for Montanans and a more stable market.

But Taxpayers Against I-145 campaign director Tammy Johnson says the plan is far from foolproof.

“It’s a huge risk that just probably isn’t going to play out in the long-term for the rate payer or the taxpayer,” says Johnson. “It costs a tremendous amount of money up front and it creates a lot of havoc.”

But it’s the historical havoc energy companies created that the proponents of I-145 hope voters will remember. They want citizens to recall the last 150 years when copper baron Marcus Daly, the Anaconda Copper Company and the Montana Power Company wielded control over the state’s resources and government. They want to remind voters of a decade ago when Montana produced a surplus of its own energy for some of the lowest rates in the nation. Mostly the proponents want Montanans to remember the repercussions of deregulation.

“Before deregulation Montana families and small businesses enjoyed some of the cheapest most reliable electricity in the country,” says MontPIRG Executive Director David Ponder. “That all changed when Montana power sold off our hydroelectric dams to an out-of-state energy company.”

In March 1997, the Electric Utility Restructuring and Customer Choice Act was passed. This opened the door for deregulation and the chance for Montana Power, once the state’s dominant utility, to divest its hydroelectric dams to Pennsylvanian Power and Light (PPL), which now owns 12 Montana dams, and the Washington-based Avista Corp., which owns a dam at Noxon.

Not required to sell Montana-made power in Montana or at a low cost, PPL unloaded the power on the open market, which resulted in wildly fluctuating prices. After a quick drop in the price of electricity, Montanans witnessed the biggest price spike in industry history. The 1997 regulated price of $30 a megawatt hour rose to $680 by June of 2000. Eventually the rate decreased but the drop leveled off with consumers paying many times the price of what they paid in the mid-’80s.

Supporters of the buy-the-dams initiative believe that regaining control of Montana’s native, low-cost, hydroelectric resources will lower power prices and put its citizens in control of their energy future. I-145 would create an elected Public Power Commission to study if the state should buy any of the dams. The commission would be authorized to buy [some or all] of the dams and would negotiate with the utilities over price. If the utilities refused to sell the commission could condemn the dams and buy them for fair market value. The $500 million in bonds would be paid off by power sales, and not state taxes, say the I-145 proponents.

But before the state can get into the energy business, it would need to create and pay for the Public Power Commission, including five new elected positions, and study of the issue. It’s conceivable that mismanagement could result in energy hikes, not cuts. One certainty is that the state will have to fight ongoing lawsuits if the initiative is passed.

Taxpayers Against I-145 spent the summer battling to convince a Helena District Court to remove the initiative from the ballot on the basis that it’s unconstitutional. District Judge Jeffrey Sherlock rejected that argument. But Taxpayers Against I-145 have already appealed to the Montana Supreme Court and have plenty of money to fight a legal battle far into the future.

That’s because the group Taxpayers Against I-145 isn’t exactly crowded by penny-pinching taxpayers. PPL has contributed more than $1 million into the anti-I-145 campaign and Avista has added another half million. These utility company checks make up almost 95 percent of Taxpayers Against I-145 funds.

Backers of the initiative, on the other hand, have raised only $25,000

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