Montana dream short-circuited

HELENA, Mont. — Almost a decade after the utility deregulation fad swept through Montana, the state is learning the hard way it isn’t easy to rebuild the broken pieces of a stable, publicly regulated utility once it’s gone.

When the old Montana Power Co. came to lawmakers in 1997 with a plan to offer consumers a multitude of choices for cheap power, deregulation was seen as inevitable. But power today isn’t cheaper — it’s far more expensive — and the other promises made that year now ring hollow.

Montana Power sold off its dams and power plants, and then its utility business, to pursue an ill-timed pipedream to become a fiber-optic company. It quickly went bankrupt. The company that bought the utility piece of Montana Power, NorthWestern Energy, filed for bankruptcy itself and reorganized.

Along the way, Montana went from having some of the lowest electricity prices in the country to among the highest in the region.

“It’s almost an unbelievable story when you go through all the events that happened there,” said Ken Rose, at Michigan State University’s Institute of Public Utilities. “It’s much more of a soap opera than in other states.”

Backlash has grown and given birth to more efforts to undo the effects of deregulation. Separate efforts aim to rein in skyrocketing electricity rates and give public officials more authority. But they all face huge hurdles, big price tags or federal approval.

Rose said it’s becoming clear that rate hikes have been higher in deregulated states than those that stuck with a traditional system. Deregulation has now been thrown into reverse across the country, he said.

California got all the headlines for its post-deregulation fiasco that was topped by energy market manipulation by Enron Corp., but it’s Montana that some point to as the poster child for deregulation gone awry. Montana was seen as the only low-cost energy state talked into deregulation.

Montana Power was one of the biggest spenders on lobbying at the 1997 Legislature. It wrote the deregulation bill, then persuaded lawmakers it was a good idea, said David Ewer, a legislator then and now budget director for Democratic Gov. Brian Schweitzer.

Putting the system back together exactly like it was is impossible.

An offer by five Montana cities to buy the Montana utility business from NorthWestern Energy for more than $2 billion is supported by the public in recent polls.

“I think there seems to be an understanding if Montana is going to have any say at any time on how this business is operated, this is the last chance,” said Alec Hansen, executive director of the Montana League of Cities and Towns. But the offer has been rejected by company executives, even though the largest shareholder has accused executives of spurning the offer just to protect their own jobs. And critics say government ownership would buckle under the weight of the debt used to buy the operations.

Plans to put an initiative on the ballot in November that would force the new owners of the hydroelectric dams, PPL Montana and Avista, to sell to a public agency faces voters who rejected the potentially expensive proposition four years ago. The best hope for stable, regulated electricity prices is an effort by the state to rule that PPL is a monopoly, state Public Service Commissioner Tom Schneider said. Such a decision could force the company to sell electricity at about cost, rather than at rates determined by the marketplace.

But even then, “cost-based prices” under PPL are going to be higher than back when the dams had already been paid off and sat on Montana Power’s books at decades-old figures.