Montana against Deregulation

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Cheap Power Gone, Montana Is to Vote on Buying Dams

By TIMOTHY EGAN

    NNIS, Mont., Aug. 29 ? Even with little population growth and a lack
    of high-wage jobs, Montana could always count on a few good things.
There was cheap electricity, thanks to a power company with the
personality of a rich, domineering uncle, and there were river trout
that could make people forget their troubles in a hurry.
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The trout are still here. But the cheap power and the company that
delivered it are gone. Now many people here say Montana has lost what
little economic self-determination it had, and they blame one of the few
new economic notions that did find a home here, briefly, in the 1990's:
deregulation.

In a populist campaign reminiscent of old battles against Eastern
railroads and California copper barons, Montanans are to vote this fall
on a measure that could lead to a public takeover of 12 hydroelectric
dams owned by out-of-state corporations. The proposal, Initiative 145,
would set in motion a process by which the state might buy the dams,
through either negotiation with the owners or condemnation.

Opponents say the proposal would amount to brazen property confiscation
that would do little to ease high power rates. But it is those
escalating utility bills, in a state that consistently ranks among the
nation's poorest, that are driving the campaign to take over electric
power.

The push to buy the dams of Montana is part of a broader reaction to the
energy and telecom deals that were hatched on Wall Street and changed
the face of utilities that in some states had been enduring
institutions. When companies like Enron and WorldCom expanded by buying
one utility after another, their customers were mere observers. Now, in
the aftermath of those companies' collapse, and with electricity bills
moving steadily higher, the public in far-flung American towns is
clamoring for a say.

Sold as a way to bring choice and lower utility bills, power
deregulation is now about as welcome as drought, at least in the West.
The debacle of California's experiment, which may end up costing the
state as much as $30 billion and has led to criminal inquiries into
alleged price manipulation, looms large as Californians try to return to
a regulated market.

But other states are backing away as well. On Aug. 27, the Arizona
Corporation Commission, which regulates that state's utilities, voted
unanimously to halt a six-year drive toward deregulated electricity. The
commission, whose vote keeps some of the state's major power providers
from divesting themselves of their generating plants, said deregulation
could expose consumers to market manipulation and price gouging.

Portland, Ore., meanwhile, is moving ahead with a plan to acquire,
perhaps through condemnation, Portland General Electric, a utility owned
by the bankrupt Enron Corporation. The utility, with 742,000 customers,
infuriated many of them with a 40 percent rate increase last fall.
Portland city officials say that if the utility were publicly run, it
could offer energy at much lower prices.

Deregulation can still work, supporters say, if it is set up properly.
But that is a hard sell in Montana, where people like to feel a personal
connection to the institutions that govern their lives.

>From his house above the backed-up Madison River near this little
tourist town in far southern Montana, James Bond can see water become
electricity as it courses through a small dam. Mr. Bond, a veterinarian,
wonders if that power is going out of state while his utility bills go
up.

"When I can see the dam from my house and I can't get the power from
that dam," he said, "it doesn't make a whole lot of sense."

The dam here used to be owned by the Montana Power Company, once the
state's dominant corporation. In earlier incarnations, Montana Power was
part of a conglomerate that ran mines, timber operations and newspapers,
and had an iron grip on political power under the big sky.

That sway over the Statehouse was still evident when, at the end of the
1997 legislative session, Montana Power, looking to get out of the
stodgy, regulated utility business, pushed through a deregulation bill,
which made its assets more attractive to prospective buyers. The company
said the public would benefit, with lower costs and more consumer
choices.

The Legislature, made up mostly of farmers, ranchers and small-business
owners, approved the measure with little hesitation. "The dining, the
free drinks, the contributions ? it all paid off when Montana Power
called in its chips," said Hal Harper, a former speaker of the Montana
House, who has been both a Republican and a Democrat but is now out of
politics. "We're stuck with the bill."

Montana Power sold its generating plants to the PPL Corporation of
Allentown, Pa., a company that sells power in more than 40 states and
numerous countries. The once-thriving Montana Power Company got into the
Internet service provider business, becoming Touch America, and has
nearly collapsed with the implosion of the telecom industry, losing more
than 90 percent of its market value.

The first shock of deregulation here was felt by business. In a fourth
year of increases, power prices soared to unheard-of levels in 2001.
Paper companies, mines and other industries that provide some of
Montana's few good-paying jobs began to close or lay off workers because
they could not afford to pay their electricity bills.

For residential consumers, whom the deregulation law shielded from the
first four years of price jumps, bills started to go up this summer, and
will rise again next summer.

Owners of the dams, backed by some union officials and the leaders of
the Republican-controlled state government, are challenging the
initiative in court while raising nearly $1 million to build a political
campaign against it. That sum is huge in a state like Montana, where the
cost of advertising is low, and where supporters of the initiative
expect to have little money.

The raw emotion of the issue has already made its way into court
filings. "The prospect of some Montana residents having to choose
between heating and eating is not so unrealistic," Jim Reynolds, a
lawyer for a group called Dam Cheap Power, wrote in support of allowing
voters to have their say.

The dams' owners ? in addition to PPL, a Spokane company named Avista
could lose a dam ? are leaving nothing to chance. In focus groups, they
have found that people are very upset over deregulation but also do not
like the idea of government's condemning private property, said Aidan
Myhre, a spokeswoman for Taxpayers Against Initiative 145.

"Property rights works in our favor, but deregulation is just not
popular," Ms. Myhre said. She said her side would argue that the state
could not run power plants efficiently and that Montana could not sit on
the sidelines of global business.

"We live in a global environment, and Montana is not this little cell
that can determine its own destiny," she said. "Besides, there is no
guarantee that if the state were to take over the dams, they could offer
lower prices."

Though few polls yet give a good indication of where the electorate
stands, Ms. Myhre said the dams' owners would have to "educate people."

A yes vote would not automatically lead to state purchase of the dams.
It would set up a commission to determine whether it made sense for the
state to buy the dams and run them. If so, the state would either
negotiate to buy them or condemn them and pay market value for them.
Revenue bonds of as much as $500 million would finance the acquisition.

The initiative's supporters cite the Montana Constitution, which says
all rivers in the state are to be used for the benefit of Montanans.

"A river running downhill ? there's no cheaper power in the world,
because there are no fuel costs," said State Senator Ken Toole, a
Democrat who is a leader of the buy-the-dams campaign. "We have this in
our backyard. Yet we went from some of the cheapest power rates in the
nation to some of the highest."