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HELENA – Montana Power Co. has asked the state Public Service Commission to reconsider its June 26 decision asserting it has the authority to continue to regulate MPC’s electricity rates for its 288,000 consumers even after mid-2002.

The PSC is scheduled to take up the motion at a work session Tuesday. However, the PSC rarely reverses itself and adopts reconsideration motions.

It’s the same order that PPL Montana, which bought Montana Power’s generating plants in 1999, challenged in a lawsuit in federal court filed last week. PPL contended the PSC had no legal authority under federal law to regulate the cost of power that PPL will sell to Montana Power beginning July 1, 2002.

In the Montana Power motion, filed earlier this week by its general counsel, Mike Manion, said the PSC order does not comply with state law.

“The Legislature did not intend to place MPC in the ’California box,’ where MPC would be forced to buy high and sell low, yet that is precisely the situation that the commission will create for MPC if it does not reconsider its previous order….,” Manion wrote.

Montana Power is entitled under the law to collect in rates the wholesale costs prudently incurred to serve its customers, the motion said,

The motion said the PSC conclusion “defies reality” when it concluded that Montana Power’s sale of its generation assets did not disintegrate MPC from an electric utility monopoly with generation, transmission and distribution functions.

“In no sense does MPC have control over the generation assets it sold to PPL Montana … so that it can fairly be that it can be considered an integrated utility,” the motion said. “MPC and PPL are separate companies with no affiliate ties; they do not share employees or directors; and, they do not co-own any facilities or plants.”

Montana Power also disputed the portion of the order requiring it to file as complete of a traditional rate case filing to support what rates would be on July 1, 2002, had it not sold the generation.

“MPC no longer owns the generation assets and has turned all generation records over to PPL Montana,” the utility said, adding: “MPC does not operate these units and has no knowledge of what actual 2000 costs were….”

Montana Power not only doesn’t have this information but many of the employees with this expertise no longer work for MPC, it said.

Manion also called it “absurd” that the PSC declared that Montana Power’s cost recovery cannot be higher than what MPC would have reasonably expected to recover in rates had the current regulatory system remained intact.

“The commission’s reasoning creates a situation the Legislature intentionally wanted to avoid: requiring a default supplier to buy at prices higher than it can recover in its rates,” the MPC motion said.

The utility said that if it buys power at rates approved by the Federal Energy Regulatory Commission and the PSC finds that the costs were prudently incurred, then Montana Power is entitled to collect these costs in retail rates, regardless of the PSC’s interpretation.

“Everyone wants customers to pay the lowest possible amount for electricity, consistent with the just and reasonable standard,” the MPC motion concluded. “It is, however, economically short-sighted and legally impermissible to insist that MPC establish rates based on phantom costs, with the ultimate goal of capping what MPC can recover from its customers based on those concocted costs.”

Neither state nor federal law permits this result, Manion wrote. Therefore, the PSC must rescind its order.

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