Montana Power Ready To Do Battle Over Default Supply Rates

Montana Power last week offered up plenty of signs that it is ready to fight tooth and nail over a move by the Montana Public Service Commission (MPSC) to assert authority over the rates Montana Power can charge default supply customers. The utility worries that the state commission's stance could ultimately put it in the position of having to buy power at high market prices and selling that same power at below market prices.

The controversy emerged last week during an MPSC work session in which the state commission said it believes that it has the authority to set rates for Montana Power's electric default supply obligations after July 1, 2002. Under Montana's electric restructuring law, the MPSC named the utility as the default supplier until 2004, a role that has since been extended by the Montana Legislature to 2007. At the work session, the MPSC decided to assert authority on the rates that the utility can charge its default supply customers and told its staff to prepare an order to address this matter.

Montana Power is concerned that the MPSC's decision could result in the company having to buy power at high market prices and sell it to customers at below market prices after a low-cost power supply contract expires on July 1, 2002. "The basic thought is that deregulation is here, it started in 1997, and we're proceeding through this process and we don't think that you can say that deregulation does not exist and go back and try and create rates on a non-deregulated model," Cort Freeman, Montana Power's director of corporate communications, told NGI.

"If the public service commission asks for a filing as [to] what rates would be without deregulation, we're saying that that might produce rates that are lower than we can get on the open market as a default supply agent for our default customers," Freeman continued. "So, we don't want to be in the position of buying high and selling low," the spokesperson added. "We think that a contract we have with PPL Montana at four cent power for two-thirds of our load moving forward for five years is a pretty good deal and is a prudent deal in this market and that we should be able to recover fully the cost of that contract, plus the other contracts that we'll enter into in order to provide a secure and reliable source of power for our default supply customers," he went on to say.

Meanwhile, the company states that although the MPSC has yet to issue an order in this matter, Montana Power will have the opportunity to respond through a series of steps, including court action. When asked if the company would consider going to the Federal Energy Regulatory Commission over the dispute, Freeman said it was too early in the process to say what specific steps Montana Power might take.

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