Avista happy to be out of this dam mess-Spokane company, Avista Utilities, works to remain under the radar in Montana dispute

Avista Utilities and PPL Montana fought arm-in-arm against a dam-condemnation initiative on last fall’s Montana ballot.

Bert Caldwell
The Spokesman-Review

Arm’s length better describes their relationship today, although that may understate the distance the Spokane utility is trying to put between itself and its former partner.

PPL has become the lightning rod for resentment created by the unintended — by lawmakers, anyway — consequences of Montana’s disastrous decision to deregulate its utility industry. If you’re Avista, you don’t want to stand too close.

Montana Power Co. seized on deregulation to sell its generating plants and dams to PPL in 1999 and its other utility assets to NorthWestern Corp in 2002. The company transformed itself into Touch America, a telecommunications business, just in time to get caught in the downdraft caused by overbuilding of fiber-optic networks. A stock that peaked at more than $64 per share in early 2000 is worth about 37 cents today.

The losses dwarf writedowns Avista took on its telecommunications venture.

Meanwhile, PPL, having paid $767 million for Montana Power’s facilities, set about making a profit on its investment. With deregulation, the company could charge whatever the market would bear. In 2000 and 2001, the market was so high many businesses in Montana could no longer afford power. They shut down, laying off hundreds of workers.

Residential rates are up a relatively modest 10 percent.

Passage of Initiative 145 would have authorized possible state condemnation and purchase of PPL’s 10 dams in Montana. But the proposal would have applied to Avista’s Noxon Rapids dam as well.

Avista spent almost $700,000, and PPL more, fighting I-145, which failed by a 2-to-1 margin. Most legislators also lined up against the initiative. But the votes were barely counted before PPL notified the state it would protest the tax assessment on company dams. PPL had argued before the election that the dams were grossly underassessed, and the state could not afford to buy them.

Post election, presto-chango, the dams are overassessed!

Sen. Jim Elliot, a Democrat from Sanders County in Western Montana, says folks are none too happy. "Incensed is a fair word to use," he says of the reaction, which has spurred legislation in Helena that would double the tax rate on hydrogeneration facilities.

One of PPL’s biggest dams — Thompson Falls — happens to be in Sanders County. So is Noxon Rapids. The taxes on Thompson Falls amount to $1.5 million, or 11 percent of all county revenues. PPL is protesting $1.2 million of that.

In Montana, protested taxes must be held in escrow, or used under the condition they are subject to refund if PPL’s protest succeeds. That pains counties like Sanders with little other property of substantial assessed value.

And it provokes legislators who feel like they have been double-crossed. PPL’s protest could create an $8 million hole in Montana’s tattered general fund over the next three years.

Elliot says fellow lawmakers weary of PPL games may follow through on the threat to double the company’s taxes to $31 million. The move, he notes, would simply restore the rate in place before PPL sought, and got, a reduction.

The good news for Avista is the exceptions included in the retaliatory legislation that would spare Noxon Rapids. Years of good works, like the cooperative dam relicensing effort of a few years ago, are paying off.

"They’ve been good to my county for a long time, and I’m not interested in screwing them," says the salty Elliot, who adds that PPL’s behavior frequently elicits contempt.

PPL spokesman David Hoffman says the company is merely trying to defend itself against discrimination, and has tried to accommodate counties where its protest may cause financial duress.

Elliot says the gestures are unlikely to deflect legislator anger. PPL has fumbled since coming to Montana. And the temptation to strike back has probably been heightened by bitterness toward Montana Power, which rammed deregulation by the lawmakers and cashed out of the utility business, only to implode as a telecommunications concern.

Avista may have made some missteps the past few years but, except for some overly blunt talk from former Chairman Tom Matthews, largely managed to sustain the good will of lawmakers and regulators.

With the Montana Legislature grasping for revenue, staying off the bull’s-eye will pay off.

•Business columnist Bert Caldwell can be reached at (509) 459-5450 or by e-mail at [email protected]

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