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A group of Beartooth Electric Cooperative members is questioning whether its board is making good financial decisions in the wake of a series of rate increases and plans for a gas-fired power plant near Great Falls.

As of Monday, about 70 BEC members had signed a letter calling for the board of directors to do its own, independent analysis of whether building phase two of the Highwood Generating Station makes economic sense before committing the cooperative to a potential $300 million, long-term financial obligation.

Also Monday, the Huntley-based Yellowstone Valley Electric Cooperative, which has an interest in the Highwood plant, urged its partners in the project to vote against increasing the project's borrowing limit to $300 million.

Dick Nolan, a Luther-area resident and cooperative member who wrote the BEC letter, said on Monday the letter was delivered to the co-op's office in Red Lodge last Friday.

"We want an independent expert to do due diligence," Nolan said.

Beartooth will hold its regular board meeting on Friday in Red Lodge to consider the Highwood financing issue and other matters.

Highwood is a 120-megawatt gas-fired plant being built by the Billings-based Southern Montana Electric Generation and Transmission, which also provides wholesale power purchased primarily from PPL to its members.

Southern is an umbrella cooperative composed of the BEC, Yellowstone Valley, Mid Yellowstone, Tongue, Fergus cooperatives and the City of Great Falls. A member from each cooperative and the city sits on the Southern board.

Phase one of Highwood, a 40-megawatt plant, is under construction and is expected to go on line later this year. The second phase would add additional power generation and is set for operation in 2014.

Last Friday, the Southern board postponed until June 27 deciding whether to increase its funding limit for the Highwood project from $150 million to $300 million. Beartooth's representative on the Southern board, John Prinkki, said he wanted to review the matter with his board before voting.

The Southern board also raised its wholesale rate charged to its members by 4.2 percent, its third increase in seven months, to cover revenue it will lose when two of Great Falls' customers switch to another power supplier.

Nolan said Beartooth members have the highest rates in the state after two rate increases this year. The letter didn't include the latest wholesale rate increase, he said.

Members are most concerned with future rates because of the Highwood project, Nolan said. Southern's efforts to get funding for phase two appear to be based on unchallenged information and analysis provided by the engineering firm building the first phase, he said.

"BEC has no known plans to secure expertise to examine the impact on BEC rates of building a plant," the letter said. Southern, the letter continued, also has backed its financing proposal to investors with a contract that requires member co-ops to pay what ever rate it charges for 37 years, until 2048.

"That's crazy," Nolan said.

The letter calls for an end to secret and confidential restrictions on all BEC and Southern information and for an independent evaluation to be made public.

Another Beartooth member, Chris Storm, of Luther, is looking into a possible recall drive if the board votes to continue supporting the Highwood plant without further study.

"Frankly, there are many of us who are pretty upset with the continual rate increases and feel like the Highwood thing is being railroaded," Storm said.

Storm plans to wait to see what happens at the Friday board meeting before proceeding with a recall drive.

Prinkki said he had not yet seen the BEC members' letter, but that there are many members who support the Highwood project.

Prinkki also said he is comfortable with the analysis Southern has provided on the Highwood project. "They tell us we're doing it right," he said. "You trust in the engineers that work on these projects."

Three of co-op boards in the project -- Fergus, Mid Yellowstone and Tongue -- already have approved the Highwood project, Prinkki said. The project will go forward, even if Beartooth decides against it, he said.

Yellowstone Valley, which is suing to leave Southern and is not part of Highwood plant, still believes that as a member of Southern, it could be held financially responsible if the project fails, said David Kelsey, Yellowstone's board member on Southern.

Yellowstone Valley sent a letter to fellow Southern board members urging them to vote no on increasing the debt limit for Highwood. The letter also is being sent to each co-op board member.

Yellowstone is calling for an independent analysis of the Highwood project and questioned building a power plant when Southern is losing money by selling excess power into the market.

Contact Clair Johnson at cjohnson@billingsgazette.com or 657-1282.

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