NWE OKs minimum bid for Great Falls gas plant

The unfinished natural gas plant in Great Falls that NorthWestern Energy mothballed after spending millions of dollars is apparently being sold.

The company signed a contract with an unnamed buyer July 18. That bid will be used as a "stalking horse" or a minimum bid to encourage better deals for the bankrupt NorthWestern Corp., the parent company of NorthWestern Energy.

By JAN FALSTAD
Of The Gazette Staff

http://www.billingsgazette.com/index.php?id=1&display=rednews/2004/08/13/build/state/30-nwe.inc

"It is not exactly a bankruptcy process, but it will follow the guidelines," said NorthWestern Vice President Roger Schrum. "We have to show we got the best price."

The Great Falls plant, which is called Montana First Megawatts, isn’t formally part of NorthWestern’s bankruptcy in Delaware because it is owned by a separate subsidiary. The plant is about one-third complete and the turbines and generators remain in Great Falls.

NorthWestern invested $78 million in the project before construction was stopped in 2002. The agreement with the unnamed buyer prices the plant at $30 million.

Montana Public Service Commission Chairman Bob Rowe said he hasn’t seen a formal proposal.

"My understanding, and this is second-hand, there is a letter of intent with a Canadian firm to purchase the facility," Rowe said.

That bid would then "set the bar for anyone else who wanted to bid" at auction, Rowe said.

This appears to be the same process that Touch America Holdings used when selling off its fiber-optics network to a Canadian company at the height of its bankruptcy last summer.

NorthWestern also said it signed a deal July 20 with the Montana Consumer Counsel Bob Nelson negotiating the cost of the plant’s power.

Two years ago, state regulators rejected the Great Falls plant as too expensive and not in the best interests of Montana consumers.

Schrum referred questions about the negotiated costs to Nelson.

"That is not an agreement that has been made public," Schrum said.

NorthWestern received tentative federal approval of the costs of the Great Falls plant last fall, but Montana regulators objected. That means Nelson’s hands are tied.

"I can’t give you the details of the settlement until it is filed and approved by the Federal Energy Regulatory Commission due to their rules," Nelson said.

When the PSC rejected the first contract for the Great Falls plant, natural gas cost around $3 per thousand cubic feet. The cost has doubled today to the $6 per thousand cubic feet range.

Natural-gas plants are more expensive than coal-fired power plants. That’s because they are designed to run when power demands peak, like on hot summer days when air conditioners are humming.

Schrum said it is NorthWestern’s intention to continue the project.

"It’s certainly our intention the plant will be built on site. We believe it will be a great asset for Montana," Schrum said.

He said if the plant isn’t built, the turbines and other equipment will be sold.

NorthWestern Energy bought the transmission and distribution lines from the former Montana Power Co. in February 2002, but it owns no power plants in this state.

So all the electricity to serve more than 300,000 Montanans must be bought from other companies.

An independent, third-party company, Lands Energy Consulting Co., of Seattle, Wash., is collecting and evaluating bids to supply NorthWestern customers through 2007 and beyond.

In the next few months, the PSC must approve this mix of contracts, including the Great Falls plant.

However, Schrum said this is not an attempt to make the PSC accept a proposal it has rejected before.

"This is one bid out of probably over 50 bids presented," Schrum said. "It will all be based on price and capability of providing the supply."

Copyright © The Billings Gazette, a division of Lee Enterprises.