When discussing the cost of electricity, those in the industry point to the complexities involved. But the average utility customer cares less about details than his or her monthly bill.
So when the bottom line jumps by 10 to 20 percent, as it has for the co-op members of Southern Montana Electric (SME), there are bound to be questions.
Southern Montana Electric Generation and Transmission serves as the umbrella cooperative that contracts power for five south-central Montana member co-ops, as well as Electric City Power of Great Falls. All told, the cooperatives account for 40,000-plus meters in Great Falls, throughout south-central Montana and even south of the Wyoming border.
Since January, SME's member co-ops have seen four wholesale rate increases - 8 percent in January, another 4 percent in May, an additional 5 percent in August, and most recently, a 7.5 percent hike in September - not to mention an extra 4 percent transmission loss charge instituted in February.
And that's not the end. Tim Gregori, CEO of SME, noted that the member co-ops are likely to see another rate increase of about 3 percent sometime around January 2010.
While the added charges suggest wholesale rates have risen more than 25 percent this year, Gregori explains that the cumulative effect actually comes to a 17.4 percent rate increase. He also emphasizes that the utility customer is likely to see only half that amount in his or her monthly power bill.
What especially galls members is that while SME's rates were rising, electricity rates in general were falling. Claudia Rapkoch, spokesperson for NorthWestern Energy, points out there are numerous factors, including contracts and power supply sources, that result in varying costs among utilities. At NorthWestern, she said, supply costs have dropped by 30 percent over the past year, meaning customers' bills are roughly 15 percent lower.
"That is a side benefit of this economic downturn," she said.
SME, however, has yet to enjoy that same benefit. In fact, Gregori said one of this year's rate hikes was implemented because SME had excess energy it was forced to sell at a discounted price.
"The price of electricity is at one of the lowest levels in the past several years," he said.
As Gregori addresses the factors behind SME's rising charges, he speaks of a double-whammy. The cooperative's contracts for low-cost hydropower through the Bonneville Power Administration began phasing out during one of the nation's most significant economic downturns, he said.
"And we did that with relatively modest rate increases," he said.
No doubt some members of the Red Lodge-based Beartooth Co-op would contest the term "modest." Last winter, Beartooth members' bills jumped 30 to 40 percent counting rate hikes, an increase in base charge and a new surcharge to cover the proposed Highwood Generation Station. At the co-op's annual meeting in September, Manager Ron Roodell told members the rate would go up another 5.2 percent this month. He emphasized that, except for the surcharge, the 2009 increases had nothing to do with the Highwood plant.
But Beartooth was not alone. Scott Sweeney, manager at Fergus Electric Cooperative in Lewistown, said customers saw a 9 to 10 percent increase in April and will see an additional jump of 5 percent on their November bills.
At Yellowstone Valley Electric Co-op, retail rates have gone up 16 percent over the past two years. And manager Terry Holzer anticipates another rate hike to cover this year's added wholesale charges.
Yellowstone Valley, which accounts for 38 percent of SME's load, has filed a lawsuit to break its contract with the umbrella cooperative. Holzer said they've been blindsided by the monthly rate hikes, which, by his calculations total 55.7 percent over the past two years.
"The bottom line is, we have to get control of power costs and lessen the acceleration of the rate," he said. "We see a better future away from this G and T (generation and transmission)."
Holzer also cites a 2008 statewide survey, saying SME was charging its member co-ops the highest rates of any generation and transmission co-op in the state, 28 percent more on average. And that was last year, he said.
Gregori counters such statistics. He said comparing co-ops makes no sense because they have access to different energy supplies. Co-ops in Western Montana still have contracts for relatively cheap hydro power, which are being phased out east of the divide, he said.
So, what has prompted SME's frequent rate hikes? Holzer charges SME's board of directors with signing power contracts that require SME to purchase more power than it needs. He also cites the $40 million spent on Highwood, which has yet to be built.
Gregori offers varying reasons for the rate increases. The 8 percent increase in January was to cover the phasing out of contracts with BPA that began in July 2008, he said.
As for the transmission loss charge implemented in February, that was an adjustment for a billing error that had been going on for several years, he said.
"The co-ops had been getting a freebie," he said.
He attributes the May rate increase to the depressed national economy, a very soft energy market and a mild winter.
The August rate increase was instituted to cover pending rate increases that the BPA and the Western Area Power Administration would be charging to SME.
As for the latest rate increase, the matter may not be resolved until Yellowstone Valley takes SME to court next spring. Gregori said the extra 7.5 percent charge is directly related to the fact that one member had not paid what it owed. He did not identify the "errant" member, but there was little doubt he was referring to Yellowstone Valley.
Holzer offered a different take. It was his understanding, he said, that SME needed money to pay a line of credit established a year ago for the power plant project, of which Yellowstone Valley is no longer involved. It was also his understanding that the money had already been repaid to SME, leading him to wonder why the other member co-ops aren't balking at the rate increase.
"They must be going, I'd assume, through the same financial difficulties we are," he said. "Why aren't they upset over this?"
While Yellowstone Valley tries to exit SME, the city of Great Falls is also reviewing its involvement. A report, expected sometime in October, is intended to assess the risk to the city-owned utility, Electric City Power.
Whatever the outcome, Gregori said, both Yellowstone Valley and ECP are bound by long-term contracts.
"There is an obligation and understanding that the relationship will exist through the terms of the contract," he said.