Another bait and switch?

The city of Missoula isn’t the first to allege the Carlyle Group hasn’t fulfilled commitments it made in 2011 when it sought authorization to purchase Mountain Water.

On May 5, the city provided additional insight into its attempt to forcibly acquire the local water system from Carlyle Group, one of the world’s largest private equity companies. The information came in an amended complaint filed one month after the city originally petitioned the Missoula District Court to approve an eminent domain proceeding.

Among the most eye-catching details is an account of verbal commitments allegedly made by Carlyle Group Infrastructure Fund Manager Robert Dove to municipal officials as he attempted to persuade them to support Carlyle’s bid to purchase Mountain Water. According to the legal filing, Dove promised on multiple occasions to sell the utility to Missoula in 2013. Dove’s pledge prompted Missoula Mayor John Engen to support the deal. However, when the time came, the city alleges in legal filings, “Mr. Dove reneged on the promises.” Dove’s failure to fulfill the commitment constituted, according to the city, “a classic bait and switch.’”

Similar, albeit quieter, claims are coming from the Montana Consumer Counsel. In a January court filing, the watchdog MCC argues that the Carlyle Group’s pledge to use its deep pockets as an asset to local water users haven’t come to fruition.

“There should be some benefit for the Missoula ratepayers,” says attorney Monica J. Tranel, who’s representing the MCC.

As noted in MCC’s legal filings, Carlyle’s access to low-interest rates, which run roughly half what Mountain Water paid prior to being purchased by the global equity firm, decreases the cost of infrastructure investments. MCC unsuccessfully argued those savings should be passed down to water consumers when the Public Service Commission late last year deliberated a rate request from Mountain Water.

Despite MCC’s argument, the PSC approved an increase of about $1.50 per month for the average residential metered water user.

MCC now alleges in its petition for judicial review that the increase is unlawful and the District Court should mandate the PSC recalculate how much locals pay for water.

“The Commission is compelling Missoula ratepayers to forego the benefits they were promised would materialize via the acquisition by Carlyle and therefore overpay...,” the filing alleges.

Tranel hopes for a decision from the court by the end of the year.

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