The first stage of the Highwood Generation Station project is drawing closer to completion, but the gas-fired power plant located outside Great Falls and matters related to it continue to divide members of Southern Montana Electric, which is building the facility.

During its January meeting in Billings, representatives of the city of Great Falls and the five rural electric cooperatives that make up Southern Montana were told that the first phase of the Highwood Station could go online as early as June or July this year.

Meanwhile, a majority of board members — Yellowstone Valley Electric and the city of Great Falls abstained — voted to proceed with "due diligence" in the analysis of a second phase of the project. Tim Gregori, general manager and CEO of Southern, said that if the board should secure financing and approve building phase two, it could be a reality by the latter half of 2013.

During an earlier interview, Gregori said phase one of Highwood was designed to serve only as a peaking or "load following" plant that would provide additional electricity during times of peak demand. By adding phase two, he said, Highwood would "increase its options to include a full range of service opportunities for a peaking facility and a base load facility."

Gregori questioned published estimates of the project's cost but declined to offer his own estimate.

As the board discussed Highwood and energy markets, representatives from Yellowstone Valley Electric Cooperative questioned its liabilities as a member of Southern. YVEC initially supported the Highwood project but withdrew its support when the national Rural Utility Service denied funding. Since then, tensions have grown between the Huntley-based co-op and Southern's other member co-ops. YVEC, which is no longer a partner in the Highwood project but is bound by contract to purchase power from Southern for several more decades, filed a lawsuit in an attempt to divorce itself entirely from Southern. After mediation recently failed, a court date has been set for November.

The city of Great Falls, also a member of Southern, is reconsidering its role as a supplier of electricity. Throughout most of its history, that city's Electric City Power has lost money on its venture.

Earlier this year, Southern suggested the possibility of ECP's customers forming their own electricity co-operative, which could theoretically remain under the Southern umbrella.

Bob Jones, chair of the Great Falls City Commission, pointed out that it's yet to be determined whether the move would be legal.

In early January, Gregori traveled to Great Falls to discuss the proposal with some of ECP's customers. His informational meeting drew the ire of YVEC representative Dave Kelsey, who referred to the action as "circumventing" ECP. Gregori's meeting also drew a reserved rebuke from Great Falls representative Greg Doyson, who asked for Southern to exercise caution and courtesy to prevent "just a one-sided conversation."

Gregori argued that his intent was not to circumvent ECP, but to serve as a resource to ECP's customers.

Terry Holzer, general manager of YVEC, said even discussions about a possible new co-op in Great Falls create a threat to NorthWestern Energy. Already, he said, he has seen local repercussions, where the long-established service lines between NorthWestern and YVEC have blurred.

"This is going to get even more difficult for co-ops as we go along," he said.

Gregori acknowledged competition within traditional utility service areas, but he argued that the problem started long before talk of a new Great Falls cooperative began.

"And it could impact all 26 co-ops (in Montana)," he said.