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The bankruptcy trustee for Southern Montana Electric Generation and Transmission Cooperative is considering proposals for reorganizing the Billings-based wholesale power supplier, a lawyer told the judge in the case on Tuesday.

Denver attorney John Parks, who represents Southern’s trustee, Lee Freeman, said “quite a number” of proposals had been received for consideration by a Sept. 17 deadline in a request for proposals.

“We are considering them. There is a reorganization process,” Parks told U.S. Bankruptcy Judge Ralph Kirscher during a hearing in Billings.

Also during Tuesday’s hearing, Kirscher heard arguments on a motion by Southern to dismiss a case against it by Beartooth Electric Cooperative, one of its members. Beartooth, based in Red Lodge, is seeking to void a 2008 wholesale power contract with Southern.

The reorganization proposals have been circulated among Southern’s members and creditors for comments, Parks said.

Parks declined to release the proposals to the public or say how many were submitted because the trustee wants to retain the ability to negotiate. The proposals also are being reviewed to see if they meet the requirements of the request, he said.

The trustee intends to announce by Oct. 15 which of the plans, if any, could form the basis for a reorganization, Parks said.

The trustee intends to settle on a reorganization plan this year, with the goal of Southern emerging from bankruptcy as “a viable, reorganized company,” court records said.

Next month will mark the one-year anniversary of Southern’s bankruptcy filing, the first such bankruptcy of a wholesale power cooperative in Montana.

In October 2011, Southern’s debts stemmed from having contracted for more power than it needed, primarily from PPL, at expensive rates. The cooperative also had borrowed $85 million to build the Highwood Generating Station, a 40-megawatt natural gas power plant near Great Falls. In addition, Southern was trying to borrow up to $215 million more to enlarge the plant when it went broke.

Southern provides electricity mostly to five rural co-ops and the city of Great Falls.

Three of its members -- Beartooth, Yellowstone Valley Electric Cooperative, based in Huntley, and Great Falls -- have filed suits against Southern seeking to leave the organization or to void contracts.

On Tuesday, Parks argued that Beartooth’s suit should be dismissed. Some of Beartooth’s claims were premature, not valid or could be better resolved in the reorganization process, he said.

While Beartooth attorney Martin Smith agreed that two of its claims could be dismissed, he said three other claims should proceed. Beartooth wants the power contract voided because of concerns about the financial risk it poses.

Southern pledged the contract, along with similar contracts from some of its other members, as security for the initial Highwood loan.

Beartooth argued that the contract was not approved by the Wyoming Public Service Commission, as required. Beartooth has some customers in Wyoming. Beartooth also claims its contract cannot be assumed or assigned as security without Southern first getting Beartooth’s approval, which it didn’t.

Kirscher said he would rule later in the Beartooth matter.

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Federal Court, Yellowtone County Reporter

Federal court and county reporter for The Billings Gazette.