Flathead Electric looks for future power

With a 2011 deadline looming to find new sources of low-cost power, the Flathead Electric Cooperative Board of Trustees is considering joining a multistate cooperative of other electric utilities.

It’s not a done deal, though, Cooperative General Manager Ken Sugden said Wednesday.

Trustees are expected to vote at their March 26 board meeting whether to join the Portland-based Pacific Northwest Generating Cooperative — known as PNGC Power — an electric generation-and-transmission cooperative of 16 other Northwest electric distribution cooperative utilities in a seven-state region.

The pending plan to join the interstate group was criticized by former Flathead Electric Cooperative board president Francis Rosse in a letter published recently in area newspapers.

Rosse maintained that Flathead Electric would have to “turn over” its low-cost federal hydropower allocation from Bonneville Power Administration to the Pacific Northwest cooperative if it joined.

Not true, Sugden said.

PNGC Power members assign their BPA power supply contracts to the cooperative, but member co-ops retain all the statutory rights they have as individual utilities. There is no transfer of assets, Sugden said, adding that member cooperatives do not contribute BPA hydropower to PNGC.

If Flathead Electric joins the larger cooperative, it would retain its BPA preference rights as a member of PNGC and would retain those rights even if it later left PNGC, he explained.

Co-op trustees have been exploring several options to meet members’ power needs after BPA in October 2011 caps the amount of low-cost power it

provides to Flathead Electric.

In late 2008 the board signed a contract with BPA to provide its capped power allocation through 2028, then began looking at other alternatives to meet the cooperative’s current projected growth rate of two to three additional megawatts annually.

Energy-efficiency programs have been ramped up to buffer some of the required power load, but conservation alone can’t accommodate all of the expected growth, Sugden said.

Flathead Electric could opt to let BPA buy power on its behalf at market rates, and was under a Nov. 1, 2009, deadline to tell BPA whether it would find its own resources or have BPA buy power for the co-op. The board decided to take BPA’s offer for the first three years, and will buy incremental power from BPA at 5 to 5.5 cents per kilowatt hour during that time, Sugden said.

The cooperative currently pays BPA 3.5 cents per kilowatt hour for power from the federal Columbia River power system.

The board has a September 2011 deadline to decide whether it will have BPA buy incremental power for the five years beyond its three-year commitment.

The Bismarck, N.D.-based Basin Electric Cooperative was one of the groups the Flathead Electric trustees considered joining. Following a close vote, the board declined to join Basin Electric because as the power supply comes across Montana, once it hits BPA’s system Flathead Electric wouldn’t be able to get firm transmission capacity, Sugden said.

At the time the board was discussing Basin Electric, federal climate-change legislation was on the front burner, including a carbon tax, and most of Basin Electric’s resources are coal plants.

A start-up group called Northwest Requirements Utilities, a mix of cooperatives and municipal power entities, is another alternative the board has discussed but has not yet voted on.

PNGC is among the most desirable options at this point, Sugden said.

“What the board has said is that the safest long-term [approach] is equity in power-plant resources,” he said. “We’ve discovered we can’t afford to build resources by ourselves. We have to work together with some group.”

Joining a group such as PNGC gives its members significant financial advantages, he added.

Rosse maintained that it will cost Flathead Electric $8 million to $14 million to join PNGC, but Sugden said that while he can’t disclose specific figures, the amount is “nowhere near that.”

Sugden also took issue with Rosse’s assertion that Flathead Electric would have to come up with a disproportionate share of the total financing for new plants in Oregon, including a combined cycle gas turbine plant that would cost Flathead Electric members more than $50 million in capital alone.

“It is premature to assign any numbers to potential new resources,” Sugden said.

Flathead Electric would have a seat on the PNGC board, he added. PNGC members would pay for new resources based not on current size but on future incremental power needs beyond what they get from BPA.

“Flathead would pay only based on what it requires to meet its power needs,” he said.

While Flathead Electric’s annual meeting on Saturday may include discussion about PNGC, the pending decision doesn’t require a vote from the co-op membership.

Flathead Electric customers face a proposed 2.5 percent rate increase to absorb the effects of a nearly 7.5 percent rate increase in wholesale power rates from BPA that took effect last October. The board opted to wait until spring to help its customers get through the winter heating season.

The cooperative is exploring several other potential energy resources, including a geothermal test well that should be drilled this year near Hot Springs.

 Features editor Lynnette Hintze may be reached at 758-4421 or by e-mail at lhintze@dailyinterlake.com