The Southern Montana Electric Generation and Transmission board on Tuesday approved doubling its funding limit to $300 million to complete a natural gas power plant under construction near Great Falls.

The 4-2 vote came after a brief and tense special meeting of the Billings-based Southern board, which is composed five electric cooperatives and the city of Great Falls. The co-ops are Yellowstone Valley, Fergus, Tongue River, Mid-Yellowstone and Beartooth. 

Bill FitzGerald, Southern's chairman and trustee from Mid-Yellowstone, declined to comment on the vote.

In opening comments, FitzGerald said he changed a previously scheduled conference call meeting on the matter to an in-person meeting because of the importance of the decision.

The special meeting lasted about 15 minutes, with FitzGerald allowing only Southern trustees, staff and consultants to talk.

More than 20 co-op board members and other representatives also attended the meeting.

Southern trustees representing Yellowstone Valley and Great Falls voted against the proposal, saying they wanted an independent analysis to review the effect the 120-megawatt Highwood Generating Station plant will have on members.

Highwood's first phase, a 40-megawatt plant, is to go on line later this year, while the second phase will go on line in 2014.

David Kelsey, Yellowstone Valley's member on Southern, called the decision to proceed "totally irresponsible." Southern is "drowning in red ink" and has raised wholesale rates to members three times in seven months, Kelsey said.

"We're not against the project, but the timing is horrendous," Kelsey said.

Southern is losing money by having to sell excess power into a depressed market and is losing revenue because some of Great Falls' customers have switched to another power supplier. Southern also is under contract to buy increasing amounts of electricity from PPL until 2019, five years after Highwood begins operations. 

But Southern's trustees for the four other co-ops voted to increase the funding limit, saying project been thoroughly analyzed. The proposal adopted will increase Southern's borrowing limit from $150 million to $300 million for a maximum of 35 years at a maximum 10 percent interest.

"We have vetted that out. We believe proper due diligence has been done," said John Prinkki, Southern's trustee from Beartooth. He referred to reports and studies done in 2004.

Kelsey said later the 2004 reports are dated and do not consider Southern's contract to buy power from PPL.

Southern trustees also voted down a motion by Kelsey to postpone increasing the borrowing limit until it had conducted an independent analysis of the project and the costs to its members.

Yellowstone Valley and Great Falls both are suing Southern to get out of contracts with the umbrella cooperative. While they are not considered participating members of the power plant, they believe that, as members of Southern, they are at risk if the project fails.

Tim Gregori, Southern's general manager, reached after the meeting, said he didn't know why Yellowstone Valley votes the way it does "on a project it chooses not to participate in."

When Yellowstone Valley tried to get an injunction to stop financing for the first phase of Highwood, the judge required loan documents to exclude Yellowstone Valley's contract as a pledge for the debt, which was done, he said.

Tensions among board members grew as Greg Doyon, Great Falls' representative and city manager, and Kelsey questioned the trustees whether SME, a related entity composed only of Fergus, Mid-Yellowstone, Beartooth and Tongue River trustees, had discussed the proposal during an SME meeting on Monday.

"Yes," FitzGerald said.

Gregori, who also is SME's manager, said SME discussed "pro forma economics."

"Is that not Southern business?" Kelsey asked.  Kelsey said later that Yellowstone Valley believes SME is improperly discussing Southern's business.

When Doyon asked for an explanation, Gregori replied, "You're not a member."

Doyon shot back that he was asking FitzGerald, not Gregori. "The fact is, we're still on the hook," he said.

Prinkki said the Highwood project is reviewed monthly and that everyone knew the risks. He acknowledged that the economic crisis has affected Southern but said no one knows when the economy will improve.

"We are all in this together," he said.

Doyon said Southern couldn't have it both ways with participating and non-participating members.

When Prinkki told Doyon he had the opportunity to participate in all of Southern's meeting, Doyon said that he, as a representative of a public entity, cannot participate when Southern closes its meetings. Southern frequently closes portions of its meetings.

Southern trustee Gary Helm, from Tongue River, chided Doyon, saying, "that's no excuse to not be there."

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