Arleen Boyd

Southern Montana Electric board members refused to seat Arleen Boyd, a Beartooth co-op trustee, during a board meeting on Friday.

LARRY MAYER\Gazette Staff

Beartooth Electric Cooperative officials said Monday the co-op will fight Southern Montana Electric Transmission and Generation’s refusal last week to seat its new representative on the board, calling the move illegal.

BEC President Roxie Melton said Beartooth also considers subsequent actions by Southern’s board — filing for bankruptcy and immediately hiking wholesale power rates 20 percent to its members — to be invalid.

The Red Lodge-based rural co-op board decided in a 15-minute telephone conference Monday to hire an attorney after being shut out of the six-member Southern board on Friday, Melton said.

“We have issues that are complicated and far-reaching and we need sound and competent advice,” Melton said.

Some of Southern’s other co-op members also held special meetings Monday to consider their options in the wake of Friday’s chaotic meeting. The bankruptcy filing and rate increase came as a surprise to board members who protested the meeting.

When Southern refused to seat Beartooth’s trustee, Arleen Boyd, half of Southern’s members walked out in protest. Joining Beartooth in the walkout was Yellowstone Valley Electric Cooperative, based in Huntley, and the city of Great Falls.

Within hours of the protest, Southern filed to reorganize under Chapter 11 codes and approved the rate increase after its three remaining board members met in executive session.

Southern is the Billings-based umbrella wholesale cooperative that supplies power to its members, which are five rural co-ops in central and southeastern Montana and the city of Great Falls. The other co-op members include Fergus Electric in Lewistown, Tongue River Electric in Ashland and Mid-Yellowstone in Hysham.

Southern also built the $85 million Highwood Generating Station, a 40-megawatt gas plant near Great Falls that began operations last month.

Yellowstone Valley representatives have accused Southern members who refused to seat Boyd of orchestrating the move to maintain a majority position that has supported rate hikes and increased borrowing to enlarge the Highwood plant to 120 megawatts.

Melton said BEC’s attorney will advise the co-op regarding Southern’s refusal to seat Boyd, which the co-op believes violated Southern’s by-laws, and the actions that followed.

“Everything done after the refusal to seat Arleen was illegal and we consider it a nullity,” Melton said.

Six of BEC’s seven trustees participated in the conference call, with trustees Melton, Boyd, Pat Hoffman, Dan Dutton and Dave Peterson voting to hire an attorney. Trustee Joe Kern voted no, Melton said. Trustee John Prinkki, a Carbon County commissioner, did not participate because of a commission meeting, she said.

Boyd was to have replaced Prinkki, who resigned from the Southern board and as president of BEC, after members campaigning for reform voted out three incumbents who had supported increasing financing for the Highwood plant. Prinkki and Kern also are facing a possible recall.

The turmoil with Southern has kept the phones busy, Boyd said Monday.

“The phone didn’t stop ringing all weekend,” she said. “Members are really concerned about what it means. Unfortunately, we can’t tell them.”

Yellowstone Valley’s board also decided in a special meeting on Monday to hire a bankruptcy attorney to advise it in the Southern case, said Terry Holzer, general manager of the Yellowstone Valley co-op.

“We’re not sure if Southern can remain viable as a going concern,” Holzer said.

The bankruptcy filing stayed a lawsuit by Yellowstone Valley against Southern in which Yellowstone Valley is seeking to leave its contracts. Trial had been set for Nov. 9.

The Tongue River co-op board decided on Monday to raise rates its customers pay by 12 percent in response to the 20 percent wholesale rate increase from Southern and other costs, said Alan See, general manager of the co-op. The increase will go into effect with the next bill at the end of this week, he said.

See said he fielded a few calls from concerned members but thought Southern’s action was “a well-thought-out business decision.”

Tongue River’s representative on Southern, Gerhard Helm, voted against seating Boyd and supported the bankruptcy filing and rate increase.

Southern’s general manager, Tim Gregori, did not return calls seeking comment on Monday.

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

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

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Federal Court, Yellowtone County Reporter

Federal court and county reporter for The Billings Gazette.