BILLINGS, Mont. (AP) — Montana utility regulators sought to intervene in the bankruptcy case of a troubled power cooperative on Tuesday, saying the state's participation could help shield consumers served by other utilities from any potential spillover effects.
Appearing in U.S. Bankruptcy Court hearing in Billings, Montana Public Service Commission attorney Sarah Norcott said it was "inevitable" that the state would become involved in the bankruptcy of Billings-based Southern Montana Electric Generation and Transmission Cooperative.
The government-appointed bankruptcy trustee in the case objected to the PSC's involvement, saying it was premature and could slow down the case.
Southern provides wholesale electricity to five rural electric co-ops and the city of Great Falls. It filed for bankruptcy reorganization in October, citing an "acute cash-flow crisis" that came after the co-op built a gas-fired power plant near Great Falls that has seen little use.
The PSC does not have authority over rates set by cooperative in Montana. But two of Southern's creditors — NorthWestern Energy and Energy West Montana — are regulated by the commission.
PSC chairman Travis Kavulla said the commission was seeking to protect the public interest.
"This is such an enormous disaster in the state of Montana and there's no public or government intervener in the case. The case really cries out for one," Kavulla said.
U.S. Bankruptcy Judge Ralph Kirscher questioned whether the intervention was necessary and said he was "puzzled" that the state could not protect consumer interests through its existing regulatory authority. Kirscher did not issue an immediate ruling and said he would take the state's bid to intervene under advisement.
It recently built a 40-megawatt gas-fired power plant near Great Falls and had plans before the bankruptcy to expand the plant to 120 megawatts. But meanwhile, Southern also is under contract to buy power from PPL Montana — a deal that requires it to buy more electricity than it needs.
If the PPL contract were cancelled, NorthWestern would be obliged as a regulated entity to step in and serve Southern's members, Kavulla said. That could set up a scenario where NorthWestern customers would be asked to bear the burden of those increased costs.
"Obviously, you've got a cooperative in bankruptcy that is unable to pay its bills now. We want to make sure if they do lean on the regulated utility, that they're in a position to pay for it, so they don't have to rely on anyone else to pay for it," he said.
But attorneys for trustee Lee Freeman, who is operating Southern during the bankruptcy proceedings, said the Public Service Commission has no direct stake in the case because it is not a creditor and has limited authority over co-ops.
Freeman's attorneys wrote that the bankruptcy "should not give rise to what may amount to de facto regulatory authority" over Southern through the commission's intervention.
"If and when particular issues arise that will implicate the consuming public, then that may be the proper time for the (Public Service Commission) to intervene relative to those issues only," the attorneys wrote. "In the interim, there will be countless matters that have little to no bearing on the consuming public and the (commission) has absolutely no right to be heard in connection with those matters."
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