Attorneys for Southern Montana Electric Generation and Transmission Cooperative told a federal bankruptcy judge on Tuesday that the organization's cash position is improving.

As a result of talks with PPL Energy Plus, Southern's main power supplier, Southern has stopped taking power from PPL and is buying it on the open market for about half of the contract price with PPL, said John Parks, an attorney from Denver who represents Southern's trustee, Lee Freeman.

The change became effective on Feb. 1, Parks said.

Southern intends to continue buying power on the open market and expects to save $1.5 million a month, he said. The switch is expected to build Southern's cash to about $4 million by April and "it will grow from there," Parks said.

Meanwhile, Southern is negotiating contract issues with PPL, Parks said. If successful, PPL would still be able to pursue its claims against Southern, but Southern would no longer have to buy power from PPL, he said.

Southern filed for bankruptcy in October, saying it had debts of $21.4 million and an "acute cash-flow crisis." During Tuesday's bankruptcy hearing before U.S. Bankruptcy Judge Ralph Kirscher, a Southern employee said the wholesale cooperative had about $78,000 cash on hand when it filed for bankruptcy.

Parks also said the trustee is working to stabilize Southern and its operations and should have final interim agreements in place with major creditors and power suppliers by next month.

The interim agreements will allow Southern to continue receiving electricity for its customers and using cash collateral to pay bills while it tries to reorganize.

Also pending is a ruling by Kirscher on a request by the Montana Public Service Commission to enter the case. While the PSC does not regulate rural co-ops or their wholesale suppliers, the commission claims it has an interest in the case because it regulates some of Southern's creditors.

 

 

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