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Southern Montana Electric Generation and Transmission Cooperative reversed two unpopular decisions and endorsed its controversial bankruptcy filing during a special meeting in Billings on Thursday.

The board seated Arleen Boyd as the trustee representing the Beartooth Electric Cooperative, after having refused to do so at its Oct. 21 meeting. And the board rescinded a 20 percent wholesale rate increase.

The board also ratified an earlier decision to file for bankruptcy. Southern, a wholesale power cooperative, said it is $21.4 million in the red. The co-op is seeking to reorganize under Chapter 11.

In October, half of the Southern board rejected Boyd as Beartooth's representative, then imposed the rate increase and filed for bankruptcy after a heated and chaotic meeting in which the other half of the board walked out in protest.

Board members who left said they were blindsided by the bankruptcy filing and rate hike, calling those decisions, along with not seating Boyd, illegal because there was no quorum.

The board on Thursday unanimously agreed on the three actions and on other decisions as it begins working its way through bankruptcy.

The meeting was run by Southern's bankruptcy attorney, Malcolm Goodrich, a former chairman of School District 2's Board of Trustees.

"I'm used to running school board meetings, so stay in line," Goodrich joked.

Southern, which is composed of five rural cooperatives and the city of Great Falls, buys power and sells it mostly to its members. In addition to Beartooth, the other co-ops are Yellowstone Valley in Huntley, Fergus Electric in Lewistown, Mid-Yellowstone in Hysham and Tongue River in Ashland. The wholesale supplier also built the 40-megawatt natural-gas fired power plant called Highwood Generating Station near Great Falls.

Dave Kelsey, Southern's trustee from the Yellowstone Valley co-op, said Thursday's meeting fixed "some of the things that were done inappropriately." Yellowstone Valley supported Boyd's seat on the board and refused to pay the rate hike.

Absent from the meeting was Tim Gregori, Southern's general manager who abruptly retired on Nov. 8. Questions about Gregori's whereabouts and whether he still was general manager of SME, an affiliate of Southern, went unanswered.

"He's not working here," Goodrich said.

Since becoming Southern's bankruptcy attorney, Goodrich said, he hasn't had time to track Gregori but will learn his status.

"I'm doing nothing but working on this case. I'm on the phone basically 12 hours a day," he said.

Goodrich said he is working with Southern's power suppliers, which include PPL, Western Area Power Administration and NorthWestern Energy, to reach agreement on continued power delivery during the early phase of bankruptcy.

Goodrich said he also has been talking with Prudential Financial, which loaned Southern $85 million for the Highwood plant and is Southern's biggest secured creditor, about using cash collateral so Southern can pay its bills and salaries.

U.S. Bankruptcy Judge Ralph Kirscher has set hearings for Monday in Billings on whether to appoint a bankruptcy trustee to oversee operations of Southern and whether to make final a temporary order to prohibit power suppliers from stopping service to Southern.

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.