The former manager of the Southern Montana Electric Generation and Transmission Cooperative on Friday blamed others for the co-op’s bankruptcy, telling a courtroom of creditors Friday that the mess could have been avoided if it had been able to restructure its main power supply contract.
But half of Southern’s board members “bolted and left the meeting” Oct. 21 before the power supply contract issue could be discussed, leaving no alternative but to declare bankruptcy, said Tim Gregori, who was placed on paid administrative leave Nov. 9 until his retirment takes effect Jan. 1.
After the meeting blew up, Southern filed later that day to reorganize its finances under Chapter 11.
Gregori also blamed the collapse of electricity prices, a refusal of a member co-op to pay its bills and a loss of customers.
Gregori said he still thought Southern could successfully reorganize rather than liquidating its assets.
Gregori was the only witness questioned during a five-hour creditors’ meeting presided over by Dan McKay, an attorney with the U.S. Trustee’s Office. During the proceeding, creditors have an opportunity to question the debtor under oath.
The meeting drew more than 60 people.
Southern is a wholesale power co-op that buys power and sells it mostly to its members, which include the Yellowstone, Beartooth, Fergus, Mid-Yellowstone and Tongue River rural electric co-ops and the city of Great Falls. Southern also built the 40-megawatt Highwood Generating Station, an $85 million natural gas power plant near Great Falls.
Billings attorney Doug James, who represents Great Falls in the bankruptcy, opened the meeting with two hours of cordial but pointed questioning of Gregori. James covered everything from Gregori’s employment status and the company laptop he still uses, to Southern’s organization and related companies and complex financial contacts with lenders.
Attorneys for the Yellowstone Valley and Beartooth co-ops, PPL Energy Plus and Electrical Consultants Inc. also questioned Gregori.
Gregori blamed some of Southern’s financial problems on Great Falls, which he said released many of its largest customers from their contracts, stranding Southern with power that it was still obligated to buy for the city.
Great Falls officials, however, have said some customers left when their contracts ended and others broke their contracts.
Gregori also said the Yellowstone Valley co-op was not paying its full monthly bill and that Southern was losing money by having to sell excess power into a depressed market.
Gregori said he had been meeting with PPL, which is Southern’s main power supplier and largest unsecured creditor at about $7 million, to restructure its contract. He intended to discuss the issue at the Oct. 21 meeting.
Before he could explain the PPL contract talks, the three trustees left the meeting, making bankruptcy the only choice, he said.
Representatives from Beartooth, Yellowstone and Great Falls walked out when the Southern board refused to seat Beartooth’s new trustee in a dispute over disclosure of confidential information. The trustee, Arleen Boyd, was later seated.
Gregori also answered numerous questions about Highwood.
In 2009, Southern projected that Highwood could produce electricity for $90 to $100 per megawatt hour. Since then, power prices have collapsed. On Friday, wholesale power was selling for less than $32 in the Pacific Northwest market, he said. That means Highwood power costs two-thirds more than what Southern can sell it for now.
“We are in a very adverse power situation where prices are depressed due to the national economy,” Gregori said.
Highwood has only operated for a few days since it was completed in September, he said, and some remaining glitches need to be worked out.
For Highwood to become profitable, Gregori said, another $215 million must be invested to finish Phase 2, so it can produce 120 megawatts of power and operate full-time instead of only when demand is peaking.
Gregori’s appearance at the meeting offered his first public statements since his sudden departure from Southern in November. He said he had planned to retire earlier this year but waited until the Highwood plant opened.
“As Southern Montana’s situation began to deteriorate ... I realized perhaps the time had come for me to retire,” he said.
Gregori heads Southern and two affiliated companies that all share a Billings address. Until his retirement takes effect Jan. 1, Gregori is being paid $228,000 a year for the three jobs. He also receives $74,265 in benefits, including his 401(k) retirement plan and a company car he drove to the hearing.