The first phase of the Highwood Generation Station under construction near Great Falls could be online as soon as May or June, said Tim Gregori, CEO of Southern Montana Electric.

The update on the 40-megawatt, gas-fired plant came during Southern's board meeting in Billings on Friday. With months to go before the first phase is completed, Gregori also presented information on a possible second phase at Highwood. The second phase, which would bump generation to 120 megawatts, would require board action and financing.

“I continue to present information to the board on a monthly basis,” Gregori said. “Even if the board decided to move on with phase two, it wouldn't come on until 2013.”

As board members weighed the risks and opportunities associated with power generation — the cost of wholesale power has softened with the recession — they approved a 4.5 percent rate increase for Southern's member co-ops.

According to Gregori, the rate increase was needed as Southern makes the transition from inexpensive hydro power. Its final contract for 31 megawatts with the Bonneville Power Administration expires in September.

“We believe (the 4.5 percent increase) is enough to give an appropriate margin through 2011,” Gregori said. “But we may need to readdress the rate in the June-July time frame.”

As a rule of thumb, retail rate increases passed on to the consumer run half the wholesale rate increase. John Prinkki, a Southern board member and president of Beartooth Electric Cooperative, said the co-op board was aware of the anticipated rate hike but hopes to postpone any rate changes to its members until spring.

Great Falls City Manager Greg Doyon, making his first appearance as the city's representative on Southern's board, voted against the rate increase.

“I can't go back to the commissioners to explain how this will affect customers,” he said.

Doyon's position reflects the complexity of his role representing a public entity on a board that Southern describes as private. Doyon was invited into a closed session to learn more about the proposed rate increase, but he declined, saying he could not maintain the confidentiality of information that the state considers to be public.

“It's extremely hard for us to see what's going on,” Bob Jones, chairman of the Great Falls City Commission, said during a brief break in Friday's meeting. “We want transparency so we're not going into executive session.”

The same issue is at the core of a current lawsuit filed by The Billings Gazette against Southern Montana Electric in June. The Gazette argues that because Southern accepted $2 million from the city of Great Falls, a public entity, Southern's meetings should be open to the public.

Southern's attorney maintains that the state's right-to-know provisions are ambiguous and should be evaluated on a case-by-case basis.

State District Judge Susan Watters has heard arguments but has not yet ruled on that case.