The Southern Montana Electric Generation and Transmission Cooperative reached a deal on Friday to sell electricity to a new power supply company that is in talks with potential customers in Great Falls.

The proposed contract is for 15 megawatts of electricity for three years. The price of the power and other details were not disclosed because the parties said the information was confidential.

The agreement is between Southern, a Billings-based generation and transmission cooperative, and Independent Electricity Supply Service, Inc., a for-profit corporation based in Billings. Independent was created in March with seed money of less than $50,000 from an entity related to Southern, called SME.

The deal, supporters said, could help Southern avoid losing money by picking up, through Independent, some customers who are served by Electric City Power, which is the utility of the city of Great Falls. Contacts with some of ECP's customers are expiring this year.

Great Falls along with five co-ops comprise Southern, which supplies its members with power through various contracts. Southern also is building the Highwood Generating Station, a 46-megawatt natural gas plant near Great Falls.

Southern's co-op members include Yellowstone Valley in Huntley, Beartooth in Red Lodge, Fergus in Lewistown, Mid Yellowstone in Hysham, and Tongue River in Ashland. 

Independent's president, Keith Bales, who also is president of the Tongue River co-op, said the new company wants to sell power to those who can choose their supplier. "We have gotten some commitments" from potential customers, he said.

"The main purpose is to try to stop the bleeding," Bales said. Independent is trying to help Southern and SME "get through some tough times," he said.

Independent will be buying power Southern would have to sell at a loss in the current market if it loses customers through expiring ECP contracts, Bales said. "It will save all the members money."

Some Southern members weren't so sure.

Yellowstone Valley and Great Falls, both of whom are suing Southern to terminate their contracts, voted against a contract with Independent. The two also did not participate in the closed session during which Southern members and Bales and staff discussed details of a possible contract.

Great Falls' representative, Greg Doyon, who does not attend Southern's closed sessions because he represents a public entity, said he didn't have enough information to make a decision.

Yellowstone Valley's representative, David Kelsey, said his co-op opposes Southern's closed sessions and will no longer participate in them.

Kelsey also said the co-op believes there is a conflict of interest between Independent and Southern and urged Southern to vote against a contract.

Some Southern members questioned the connections among Southern, SME and Independent.

Southern's general manager, Tim Gregori, also is the manager for SME and for Independent. Southern's attorney, Jon Doak, is SME's attorney. Doak also is the registered agent for Independent and filed the incorporation papers.

SME is composed of Southern's board members from the Fergus, Beartooth, Mid Yellowstone and Tongue River co-ops.

Independent's board of directors come from Southern's co-op members.

Along with Bales, the other directors are Allen Nordahl, the vice president of Beartooth; Steve Balster, the secretary/treasurer of Fergus; and Arlo Jensen, a board member of Mid Yellowstone.

Doak said Independent and Southern are not connected and each board will make its own decisions. Gregori's time will be apportioned and paid accordingly, he said.

Bales said Independent's shareholder is SME and that it will charge a management fee to its customers to fund itself.

"We're trying to run it as bare bones as we can," he said.

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

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