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HELENA – With electricity prices dropping, Montana Power Co. wants to renegotiate its contract with PPL Montana to buy power for less than the $40 per megawatt hour it agreed to in April, a top executive told the Montana Power Authority on Monday.

Questioned repeatedly by authority member Gary Buchanan over the $40 price, Jack Haffey, Montana Power Co. utility president, said that was still the price, but the contract had not been signed yet.

“The price is one of the items (under discussion) in large part because the market has moved,” Haffey said. “The price is in discussion. It needs to be.”

Haffey said in response to a question that nothing would preclude Montana Power from negotiating for a lower price.

But Jerome Anderson, a lawyer representing PPL Montana, which bought MPC’s generating plants in 1999, defended the $40 per megawatt hour price as a fair price, in evaluating prices. He made it sound as though the $40 price wasn’t subject to further negotiations.

“The company believes we entered into an agreement in April for $40 a megawatt price,” Anderson said. “That price is still viable.”

Asked by Buchanan if the price in the deal is non-negotiable, Anderson said: “We still believe that that agreement is an agreement that should be honored. The market situation makes that a relevant contract.”

On April 20, Montana Power agreed to buy 500 megawatts of power (or 440 megawatts net) for $40 a megawatt hour, for five years, beginning July 1, 2002. That’s when PPL’s current contract to supply Montana Power with electricity at below-market costs of $22.50 per megawatt hour expires and MPC as the default supplier must obtain electricity to meet the demand.

That’s also when a power supply rate freeze ends for 288,000 Montana Power residential and small commercial customers. Under the MPC-PPL deal, typical Montana Power customers who use 750 kilowatt hours of electricity per month would see a 50 percent or $25 monthly increase in their power bills.

PPL signed the $40 per megawatt hour contract several weeks ago, and forwarded it to Montana Power. Haffey said he expects Montana Power to ink the deal in a couple of weeks. Then it goes to the state Public Service Commission to be reviewed to see whether it was a prudent deal.

The contact is a key component of Montana Power’s attempts to build a portfolio of power contracts to meet its demand, which is 600-700 megawatts of average energy and 1,000 megawatts during peak times, according to Haffey.

“When the debate started, the words ‘free markets’ were used,” Buchanan said. “You’re riskless (now) in terms of profits and losses. If you’re riskless, how can you possibly be on my side as a consumer?”

Replied Haffey: “It’s not a riskless venture. We have to demonstrate it’s the best the market has to offer.”

Buchanan, who has been involved in several ballot issue campaigns, predicted the three or four proposed referendum and initiatives regarding utility deregulation are all likely to wind up on the ballot and stand good chances of passing. One measure would reject the law creating the authority, and another possible measure would repeal the 1997 electric utility deregulation law.

“I think the people are just plain angry over the process of the last session,” said Buchanan, a D.A. Davidson executive and former state Commerce director. “As you look back, is that the way to make sausage? Is that the way to do business?”

Buchanan was referring to MPC and PPL, which agreed to the 11th hour deal reached by the companies the day before the Legislature adjourned. Under terms of the deal, the utilities “anticipated” that the Legislature in turn would pass House Bill 434, which created the authority and guaranteed Montana Power full recovery of its costs of obtaining power; the Legislature would kill Senate Bill 512, an excess revenue tax on power generators; and the PSC would drop efforts to reregulate PPL Montana.

The Legislature complied on the first two items, although the PSC has refused.

Replied Haffey: “I think the Legislature did a commendable job dealing with a complex subject of energy and moving forward…. It is not and should not be a partisan issue.”

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