A state legislative committee is poised to seek new laws requiring wholesale and distribution electric cooperatives to be more open in conducting business and raising the bar for member approval before taking on major financial obligations.
“No more, ‘Trust me,’” said Sen. Alan Olson, R-Roundup, who is chairman of the Energy and Telecommunications Interim Committee, on Tuesday.
During a two-day meeting in Billings that ended on Tuesday, the committee heard comments on a draft bill, made one change on a voting requirement and agreed to seek public comments on the revised draft bill.
The committee will decide in the fall on whether to have the bill introduced at the 2013 Legislature.
The goal of the bill, Olson said, is to get information to the people who need it so they can make decisions.
The proposed bill is a response to the multimillion-dollar bankruptcy last October of Southern Montana Electric Generation and Transmission Cooperative, a Billings-based wholesale power provider to five distribution co-ops and to the City of Great Falls. Southern serves about 50,000 Montana households.
Formed in 2003, Southern’s financial mess stemmed from having contracted for more power than it needed, primarily from PPL, at expensive rates. Southern also borrowed $85 million to build the Highwood Generating Station, a 40-megawatt natural gas plant near Great Falls, and was seeking to borrow up to $215 million more to enlarge the plant when it went broke.
Fighting among Southern’s members over the co-op’s direction, management, closed meetings and confidential information led to lawsuits by two members seeking to leave the organization prior to the bankruptcy.
The bill draft includes vote requirements for distribution and wholesale co-ops and requires the disclosure of power demand, or load, forecasting information.
The bill draft would require a generation and transmission cooperative, like Southern, to get approval from a two-thirds majority of its distribution co-op members before it could enter into long-term bond debt for financing power plants or energy contracts meeting particular requirements.
In a change suggested by Olson, the approval from a distribution co-op would require a two-thirds vote, rather than a simple majority, of board trustees of each distribution co-op.
If a distribution co-op is “going to go out on a limb” and pledge assets, it should be by a supermajority of that board, Olson said. “The burden should sit a little higher,” he said.
The only public comment came from Arleen Boyd, a board member of Beartooth Electric Co-op, based in Red Lodge, and a Southern board member. Boyd said Beartooth is comfortable with provisions that will provide for transparency in conducting business.
However, Beartooth supported requiring a unanimous vote of a generation and transmission co-op on major financial decisions, she said.
Doug Hardy, who is the general manager of Central Montana Power Cooperative, a wholesale co-op, and helped work on the draft bill, supported the provisions.
In written comments to the committee, the Montana Electric Cooperatives’ Association, which represents 24 distribution co-ops and three wholesale co-ops, said it supports the bill as drafted.
“MECA supports this legislation because it epitomizes the second cooperative principle of democratic member control. Although no legislation can be written to prevent any and all problems from occurring, we believe this proposal is a serious effort in that direction,” the organization said.