SME board meeting

Southern Montana Electric board members, staff and co-op representatives gather for an SME board meeting in 2011.

A federal bankruptcy judge said Tuesday that he's likely to let a bankrupt Montana power cooperative keep key details of its reorganization plan secret from the public despite objections from one of its members.

The trustee for Southern Montana Electric Generation and Transmission Cooperative is seeking a protective court order that would bar its members from disclosing how much it intends to pay for power under a tentative, 10-year supply agreement with Morgan Stanley Capital Group.

After Southern Montana trustee Lee Freeman testified during a court hearing in Billings that disclosing the terms could drive up electricity prices, U.S. Bankruptcy Judge Ralph Kirscher said from the bench that he was inclined to issue the protective order.

But Kirscher added that his decision was not yet final.

In a separate ruling, Kirscher said he would grant a motion for Yellowstone Valley Electric Cooperative to withdraw from Southern Montana, after the two sides settled a longstanding dispute.

On the disclosure dispute, representatives of Beartooth Electric Cooperative had argued that consumers who ultimately would pay for power from Morgan Stanley have the right to know the agreement's terms. They said public access to such information is mandated by the "Right to Know" provision of the Montana Constitution.

"We are a cooperative and are run by our members. We are a democracy. We don't withhold information from our members," said Beartooth trustee Arleen Boyd.

The City of Great Galls initially joined Beartooth in opposing the order sought by Southern Montana. An attorney for the city withdrew that objection during Tuesday's hearing, after reaching a deal with Freeman and Southern Montana's attorney, John Parks.

The two sides said Southern Montana would provide city officials with broad information about its power supply agreements, but not hand over information that could be considered confidential trade secrets.

They said that would allow city officials to abide by open records laws that otherwise would compel them to make the information available to the public.

Freeman said disclosing details of the Morgan Stanley agreement could hurt Southern Montana and undermine the reorganization plan. He said it would expose electricity prices to potential manipulation by "unscrupulous" entities that could use the information to corner the market and make Morgan Stanley pay more for electricity.

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If that happened, he added, "the members are ultimately going to bear the burden" by paying higher rates for their electricity.

Beartooth Electric attorney Martin Smith pointed out that the information Southern Montana is seeking to keep secret goes beyond the rates it will pay Morgan Stanley. He said in court filings that would include anything the parent co-op deems confidential material.

Southern Montana, composed of five rural cooperatives and the city of Great Falls, filed for bankruptcy in 2011 after contracting with PPL Montana for more power than it needed at high rates and trying to borrow $215 million to expand the gas-fired Highwood Generating Station near Great Falls.

Several of its members, including the city of Great Falls and Beartooth, have sought to get out of the cooperative. But Freeman's reorganization plan calls for keeping the electricity wholesaler together by restructuring its debt and holding onto the 40-megawatt Highwood power plant.

Yet the cooperative's largest member, the 17,000-customer Yellowstone Valley Electric Cooperative, is now poised to exit Southern Montana under a deal that would resolve a 2008 lawsuit between the two parties.

Yellowstone Valley agreed to pay a $2.5 million exit fee under the deal with its troubled parent co-op.

Southern Montana also would transfer a portion of the below market rate power it buys from the Western Area Power Administration to Yellowstone Valley, and Yellowstone Valley would drop $7 million in claims.

Once the settlement is finalized, Yellowstone Valley would rejoin Central Montana Generation and Transmission to get the power it supplies to its customers, said John Crist, Yellowstone Valley's attorney.

It remains uncertain when Southern Montana might emerge from bankruptcy. A confirmation hearing on its reorganization is tentatively set for May.

Judge Kirscher said Tuesday that potentially could be delayed for months given that disputes remain in the case and the reorganization plan itself is expected to be challenged.

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