Posted: Sep 27, 2013 8:44 AM by Jay Kohn -MTN News
BILLINGS - Montana's first state Commerce Director recalls the "good ole" days when he used to travel the country and tout the fact that Montana had the sixth cheapest electrical rates anywhere in the nation.
"Those cheap rates were a big reason we had smelters in Columbia Falls, and silicone plants in Butte," said Gary Buchanan, now co-owner of Buchanan Capital LLC in Billings.
The relatively cheap electricity rates were the result of the Montana Power Company''s (MPC) extensive system of hydroelectric dams across Montana, harnessing the power of the state's waterways.
Then in 1997, the Montana legislature passed a controversial bill deregulating the state's electric power industry, and the rest is history.
"It was such a loss, such a giveaway," recalls Buchanan of the decision by MPC to sell its power generation facilities and exit the world of regulated utilities and venture into the world of telecommunications.
Buchanan calls that decision "the worst mistake in Montana business history".
"The original bankruptcy of Montana Power hurt thousands of retirees. The irony is that Humpty Dumpty is being put back together again, after one hell of a long ride and a lot of pain and suffering," said Buchanan.
Buchanan refers to Thursday's announcement that NorthWestern Energy is buying back 11 Montana hydroelectric facilities from PPL Montana for $900 million dollars in cash.
Combined the 11 dams have a generation capacity of 630 megawatts, nearly two thirds of Montana's power needs.
"I do think it's a good deal. I think it's good for NorthWestern and I think it's very good for the state of Montana in terms of having these hydroelectric facilities back in more local ownership," explained Buchanan.
The 11 facilities involved in the deal span Montana on both sides of the continental divide.
In western Montana, the sale includes the Thompson Falls Dam on the Clark Fork River, and the Kerr Dam on the Flathead River.
In southwest Montana, the deal includes the Madison Dam, north of Ennis.
Seven dams on the Missouri River from Helena to Great Falls are a key part of the deal. They include the Hauser, Holter, Black Eagle, Rainbow, Cochrane, Ryan, and Morony Dams.
And southwest of Billings on the West Rosebud Creek, the Mystic Lake Dam also shifts to NorthWestern ownership.
"We gave away all of that when did deregulation and Montana Power went bankrupt. We'll never get back where we were, but this is a good step at getting something back," said Buchanan.
Another irony is that Buchanan himself was part of a citizens initiative in 2002, that sought to remedy some of the damage from deregulation.
The proposal from the Buy-Back Coalition called for the public to buy back the dams from PPL.
The initiative was submitted to the Legislative Council as a way to provide Montanans with affordable power, but the idea was short-circuited by PPL when it opposed the deal.
As for lessons learned over the entire deregulation ordeal ? "The lesson we should have learned is that Montana's executive branch and the legislative branch should not be easily cowed by any company," Buchanan said.
"Deregulation was probably the worst financial mistake in our state's history. It really killed the state, really hurt us bad," recalled Buchanan.
"We have to be real careful about jumping on national trends without being really careful and without doing our due diligence."
The sale of the 11 Montana hydroelectric dams is subject to approval by the Montana Public Service Commission.
NorthWestern's Board of Directors has already approved the transaction.