Subscribe for 17¢ / day

Monday, May 14, 2001 MISSOULIAN EDITORIAL

SUMMARY: Montana Power's customers face all the risk in the unsettled market for electricity.

Montana Power Co.'s most recent request for a rate increase seems, at the risk of understatement, a trifle galling. MPC wants higher rates to offset the loss of revenue attributable to the demise of the Montana Resources copper mine in Butte, shut down due to the high cost of electricity. More than one person has suggested this is akin to the man who murders his parents and asks the judge for leniency because he's an orphan.

Brace yourself, though. The next few years may well be filled with convoluted consequences springing from the state's 1997 deregulation of electricity and, now, some of the attempts to undo the damage of deregulation.

For example, one of the things the 2001 Legislature did was pass a law guaranteeing MPC full payment for electricity it buys to fulfill its responsibility as the "default supplier" of electricity to nearly 300,000 customers. This role is rather important, since deregulation hasn't exactly attracted competing utilities, as promised. Many Montanans will be completely dependent on MPC for electricity for years to come. The guaranteed-payment law, of course, relieves the utility of virtually all financial risk - which removes one of the main forces motivating any company to make sound decisions, be efficient and be competitive. MPC assures us it intends to do all the right things. It just so happens that you, not it, will pay for any mistakes.

Maybe there won't be any mistakes. Then again, well-known stock market commentator Jim Cramer of TheStreet.com and CNBC did recently credit MPC management with making the "dumbest decision I have ever seen management make in my lifetime" - selling off its power plants and diving into the telecommunications business. The company also flirted with disaster in the early 1980s when it built an expensive power plant for which there were no customers. Let's just say guessing wrong about power prices or contract terms may not be beyond the realm of possibility.

It's no comfort to be reminded, as we were recently by MPC's utility chief, that the company didn't ask to be the "default provider" and doesn't want to do it. It's lining up electricity to serve Montanans because it has no choice. It's rare to see people perform their best doing what they don't want to do.

There's talk of an initiative to repeal the law protecting MPC. It's hard to imagine such an initiative NOT passing, should it make it to the ballot. People haven't had much chance to vent their anger and frustration about deregulation, and by our estimation, there's a fair amount of venting to come. At this point, MPC might just as well stand for "Made People Cranky."

Alas, you might just as well poke yourself in the eye, or flush a big wad of your money down the drain, as participate in a backlash against MPC. That's because - as MPC is quick to point out - without guaranteed payment, the utility could wind up paying more for electricity than it can collect from customers. As we've seen in California, that's a formula for bankruptcy. The mere risk of bankruptcy is enough to make electricity producers wonder whether they'll get paid for the power they sell to MPC. The time-honored way of offsetting such financial risk is to raise prices. Guess who'll pay those prices?

You'll also pay extra if demand for power increases and MPC has to shop the open market for more. You could pay more if, as a result of high prices and conservation, people use less electricity than MPC contracts to buy. Your bill will go up with the price of power. And because MPC is signing long-term contracts, your bill will stay up even if the price of power falls.

There's no competitive market for electricity in Montana, and there won't be one anytime soon. Power bills are headed straight up. The Legislature has passed a law neutralizing some of the market forces that might keep MPC on its toes. But the mere suggestion of consumer backlash or an anti-MPC initiative is likely to drive up the cost of electricity.

What it comes down to is this: You have to hope for the best. You have to trust MPC to make all the right decisions. You and your neighbors are stretched over a barrel, and there's not much you can do about it. Make yourselves comfortable, though. You're going to be there for a while.

0
0
0
0
0
You must be logged in to react.
Click any reaction to login.