Montana Breaking News

(November 19) NorthWestern Corp. can spend up to $420,000 a year on a public relations firm to help handle its bankruptcy reorganization and portray NorthWestern as a viable company, a federal judge has decided.

U.S. Bankruptcy Judge Charles Case II has approved a NorthWestern request to pay Gavin Anderson and Co. a monthly maximum of $35,000 to represent it to the public.

Among the duties Gavin Anderson will have is helping NorthWestern in "maintaining its public image as a viable business" during the Chapter 11 reorganization, NorthWestern told the judge.

Case agreed that retaining the firm is necessary and in the best interest of NorthWestern, its creditors and others involved in the bankruptcy. But he rejected the company proposal to pay Gavin Anderson a flat monthly fee of $20,000. Instead, he said, the firm will be paid based on its actual time worked. Case set a cap on fees at $30,000 per month, and up to $5,000 for expenses.

Roger Schrum, NorthWestern spokesman, said on Nov. 17 the company first hired Gavin Anderson in February during failed efforts to reorganize without resorting to bankruptcy. The firm has expertise in representing companies in the throes of financial trouble, he said.

By mid-February, the company’s stock price had plummeted to $2.77, barely a tenth of its value a year earlier, debt was growing and so were rumors of impending bankruptcy. Schrum said the judge’s order allows NorthWestern to continue as one of Gavin Anderson’s clients. The firm helped with NorthWestern’s sale last month of Expanets, one of the Sioux Falls-based company’s subsidiaries, he said.

But Tom Schneider, vice chairman of the Public Service Commission, questioned spending money on public relations at a time when NorthWestern is struggling to find its financial footing. "We’re concerned about all their expenditures," he said. "PR kinds of expenditures don’t sit well here. It’s frustrating that they’re spending as much money as they are."

Schneider said it’s unlikely the commission would agree to allow the company to include public relations costs in its electric or gas rates.

Source: Associated Press

Governor Commits $1.2 Million for NW Bankruptcy

(November 17) Gov. Judy Martz committed up to $1.2 million on Wednesday for the state Justice Department and Public Service Commission to hire outside experts to look out for Montana's and consumer interests in NorthWestern Corp.'s bankruptcy case in Delaware.

The Republican governor made the announcement at a Capitol press conference flanked by a pair of top Democrats, Attorney General Mike McGrath and PSC Chairman Bob Rowe of Missoula. Both men endorsed the compromise worked out among the three agencies and the Montana consumer counsel.

The Justice Department, headed by McGrath, will receive up to $850,000 to hire a financial consulting firm that will share its research on NorthWestern with the other state agencies. The PSC can spend up to $350,000, on top of the $101,000 it already has set aside, on an outside attorney.

The move almost certainly halts Democratic lawmakers' attempts to call a special legislative session to appropriate the money.

McGrath and Rowe said the compromise funding agreement is one that will work to make sure Montana has a say in NorthWestern Corp.'s bankruptcy.

Rowe said virtually every party in the bankruptcy case, including NorthWestern and the businesses it owes money to, are spending substantial amounts in the proceedings.

‘‘What we're doing is making sure the consumer and the state's interests are represented,'' Rowe said.

Martz's commitment of up to $1.2 million is nearly identical to the $1.15 million the PSC estimated was needed to hire the necessary experts for the Bankruptcy Court, he said. The money will come from part of the state's share of federal money received this year.

Source: Lee Newspapers

Utilities Make Bid for NorthWestern

(November 17) Although NorthWestern Corp. officials insist the company is not for sale, two North Dakota-based energy companies are making an offer to buy the bankrupt utility.

MDU Resources Group is joining forces with Basin Electric Cooperative, both of Bismarck, to buy NorthWestern's Montana properties and perhaps the company's utilities in South Dakota and Nebraska.

Dave Wheelihan, executive director of the Montana Electric Cooperatives Association in Great Falls, represents Montana co-ops. ‘‘Electric cooperatives in Montana have already expressed an interest in buying certain NorthWestern territories in this state,'' Wheelihan said.

About 15 of Montana's 26 rural electric co-ops are members of Basin Electric, which sells wholesale power to several Montana cooperatives from its power plants in North Dakota and Wyoming, he said.

Like NorthWestern, Basin Electric does not own any power plants in Montana. The co-op serves 1.4 million customers in nine states.

It is rare for an investor-owned utility like MDU to join forces with a co-op in running a utility. MDU paysdividends to its investors, while co-ops are owned by their customers and distribute profits through their rates.

It is more likely that MDU and Basin would carve up the territory. The specifics are unclear on who would buy which NorthWestern properties. MDU may want the Montana transmission and distribution lines. Wheelihan said his members are interested in theNorthWestern customers in Montana that are surrounded by the co-ops.

NorthWestern spokesman Roger Schrum said Friday he wasn't aware of the news conference. Company executives have said repeatedly it is not for sale, even after filing for bankruptcy protection in Delaware Sept. 14.

‘‘We've received no proposal and we have no comment,'' Schrum said.

Source: The Billings Gazette

Democrats Offer Alternative to Deregulation

(November 12) On Nov. 10, Democratic legislators presented an energy plan that calls for rural electric cooperative or public ownership of Montana’s dams and electricity distribution system to put more affordable, reliable power back in consumers’ hands.

The plan also calls for more reliance on other sources of electricity – wind power, energy conservation and natural gas-fueled power plants.

Presenting the plan called "ReFuel Montana" were Senate Minority Leader Jon Tester of Big Sandy and Sen. Ken Toole of Helena. They want to discuss it with Republican Gov. Judy Martz, the Montana Public Service Commission and leaders of the Republican legislative majorities.

Among the highlights of the Democrats’ plan are:

They want a rural electric cooperative or public power group to buy NorthWestern Energy after its parent company emerges from Chapter 11 bankruptcy. NorthWestern Energy supplies and distributes electricity and natural gas to more than 300,000 Montana customers.
They support having a cooperative or public power group buy or condemn the hydroelectric dams that PPL Montana bought from Montana Power Co. in 1997 and dedicate electricity to Montana use. Voters rejected Toole’s 2002 initiative, 68 to 32 percent, that would have allowed the state to condemn the dams and buy them for a fair market price. After PPL protested its property taxes, Toole said Montanans might be more sympathetic if a similar plan is on the 2004 ballot.
They want cooperative, private or state ownership of proposed gas-fired electricity generating plants in Great Falls and Butte and wind power projects in Wheatland County and Whitehall. They back more aggressive energy conservation efforts.
They favor use the state’s coal tax trust fund to leverage the best possible interest rate in financial markets when they borrow money to buy the utility assets.
They are creating an Energy Action Group to seek public comments on their plans and make recommendations to the 2005 Legislature or any special sessions.

Toole said the best solution might be to have rural electric co-ops, owned by their members, take over the utility property.

"I think the world is a better place for Montanans if co-ops take over the whole shebang," Toole said. In response, NorthWestern Corp. spokesman Roger Schrum said, "NorthWestern’s assets are not for sale." He said the company is working to reorganize its finances to become a much stronger investment-grade energy company that focuses on its three-state utility operation.

"A taking of privately owned energy assets and moving them to public ownership would substantially impact the state’s property tax base and create a number of unintended consequences to taxpayers and energy consumers," said Schrum, adding that his company’s annual Montana property tax bill is $48 million.

While NorthWestern appreciates all Montanans’ views on its energy supply issues, he said the company will be filing with the PSC next month a comprehensive supply plan.

Martz thanked the Democrats for their proposals and said she would forward the proposals to her nonpartisan Energy Consumer Protection Task Force for consideration. In order for the effort to be truly bipartisan, Martz said, divisive and partisan language should be set aside.

Source: Montana Standard

Despite Bankruptcy, NorthWestern Pays Millions in Bonuses

(November 12) Even though NorthWestern Corp. suffered through a financial free-fall this year, it paid 25 key employees about $2.6 million in bonuses, a document filed in U.S. Bankruptcy Court shows.

Asked why the company would award such bonuses with its financial problems, NorthWestern spokesman Roger Schrum said most bonuses were paid to top executives of the company's utility affiliate, NorthWestern Energy, which had a sound year financially.

Few bonuses were given to NorthWestern Corp. officials, Schrum said.

"Corporate officers in general did not receive bonuses because of the financial condition," Schrum said.

The company also paid $2.5 million in "miscellaneous adjustments" to three former employees and severance pay totaling $1.3 million to four former executives.

NorthWestern also paid about $21,500 in country club dues for nine executives as part of their compensation package. Company shareholders, not utility ratepayers, are footing the bill for these costs, Schrum said.

NorthWestern, Schrum said, gives all employees a chance to earn a bonus or incentive in addition to pay raises if they meet certain goals.

The company's president and chief executive officer, Gary Drook received a $600,000 signing bonus in January when he agreed to head the company on an interim basis after serving on the board, the report showed. Schrum said it was contingent on Drook staying on the job for a period. Drook is now the CEO without the "interim" label attached and makes $565,000 a year.

He also received as part of his compensation package $268,195 to pay for use of the corporate jet to fly him from NorthWestern's headquarters in Sioux Falls, S.D., to his home in Naples, Fla., and $153,827 to cover the taxes on the plane trip benefits. Drook told NorthWestern's annual shareholders' meeting in August he had discontinued the trips home to Florida because it stirred so much resentment among employees.

Chief Operating Officer Mike Hanson got $410,000 in bonuses for the performance of NorthWestern Energy, of which he is president and CEO. His annual pay is $350,000.

Some former Montana Power Co. executives no longer with NorthWestern Energy received "miscellaneous adjustments" under a contractual agreement.

William Pascoe, NorthWestern Energy's former vice president and chief operating officer for transmission, received an adjustment of $478,731, while Ernest Kindt, NorthWestern Energy's former vice president and chief accounting officer, received $278,000, the report showed.

Source: Lee State Bureau

Montana Looks at Re-Regulating Energy

(November 5) After embracing deregulation six years ago, some policy makers are asking the governor to take another big step toward re-regulating Montana's electric system.

John Hines, who chairs the governor's energy task force, has written a letter to Gov. Judy Martz recommending at least two key changes.

The task force has approved a policy change to allow utilities to build power plants and put them in the rate base, which means captive customers pay for the construction. This is the way all utilities were structured before the 1997 deregulation bill passed.

The task force also asked Martz to allow utilities to get pre-approval from regulators to build plants. Now regulators approve or reject the plan after the process is well underway. Hines said the changes would help bring stability to electricity prices and supply and that would benefit customers.

Public Service Commissioner Greg Jergeson, D-Chinook, said that while the "devil is in the details" on these complex issues, he generally favors a move toward more regulation. "Nobody wants to eat crow, but slowly, bit-by-bit, we've been putting regulation back into place," Jergeson said.

The biggest first step toward re-regulation, Jergeson said, was when the Montana legislature required NorthWestern to supply electricity and gas for its Montana customers.

Jergeson said he campaigned for the PSC last year supporting more utility regulation. Montana's energy situation has changed so drastically, he said, that the state needs new regulations that weren't needed before.

Backers of the 1997 restructuring bill argued that by ending Montana Power Co.'s monopoly, competition would force rates lower. That never happened. Small consumers like small businesses and homeowners never got to leave Montana Power's grid. Only the largest businesses using the most electricity got to choose suppliers.

After the 1997 law passed, Montana Power surprised the state by leaving the energy business and selling all its assets including the hydroelectric dams. Montana Power transformed itself to a telecommunications company called Touch America in February 2002, but that move failed. Now it is trying to wrap up its bankruptcy in Delaware.

NorthWestern's bad credit and heavy debt forced it to buy more expensive power on the spot market. It was unable to sign longer-term cheaper contracts. NorthWestern Corp., the successor to Montana Power, filed for bankruptcy six weeks ago.

Commission Jergeson said he would rather decide whether a power plant that will be around for a quarter-century or more makes economic sense for the customers than review shorter term contracts to buy power every few years. Instability isn't good for anybody, he argued "Nobody ever imagined utilities going bankrupt before. They almost never did," he said.

The energy task force, appointed by Martz last summer, makes recommendations to the governor. If she accepts them, Martz will forward them to the interim legislative committee in charge of energy. Eventually, they may be drafted into a bill for the 2005 legislative session.

Source: Billings Gazette

NorthWestern May Seek Bonuses for Top Executives During Bankruptcy

(October 29) On October 28, the Great Falls Tribune reported that NorthWestern Corp. is considering asking a federal bankruptcy judge to approve paying bonuses to retain "key employees" during the company’s bankruptcy organization. NorthWestern Corp. is the parent company of Montana’s NorthWestern Energy, which provides electricity to more than 300,000 Montana consumers and natural gas to about 157,000.

Details of the proposed request have not been made public, but the Tribune said company officials confirmed last week that they are looking at a "key employee retention plan."

NorthWestern spokesman Roger Schrum said the company is concerned about losing employees whose "knowledge and experience are important to the company in successfully completing the restructuring effort." Any incentive program would be aimed at keeping these key employees on board, he said.

Schrum declined to release details of possible retention plans, saying the company would reveal them only when the proposal is filed with the bankruptcy court in Delaware. Any such proposal would not only need the approval of the bankruptcy judge in Delaware who is handling the case, but would need to be approved by a special eight-member creditors’ committee.

Mike Schmechel of Billings, the only Montana member of the committee, said confidentiality rules bar him from talking about specific proposals or matters before the panel. But he said he would object to any plan that offers big bonuses to top executives, whom he characterized as already well-paid, and who may be responsible for the financial problems that led to the South Dakota company seeking bankruptcy protection in September.

"It seems strange to me that the top executives should expect huge bonuses in order to have an incentive to keep their jobs," he said. Schmechel suggested managers involved in the day-to-day business of running the utility are more deserving of retention bonuses than top executives with the company. But even those may not make sense, he added.

NorthWestern’s creditors would pay the extra bonuses, but state utility regulators said they have concerns about the possible long-term effect on Montana electric and natural gas ratepayers.

"If an exaggerated salary structure is built into the reorganization, they’re likely to seek rate recovery for those compensation levels after it emerges (from bankruptcy)," said Public Service Commissioner Tom Schneider, D-Helena. "That’s a question mark."

Commissioner Greg Jergeson, D-Chinook, said he wouldn’t want ratepayers paying executive bonuses to people who might be responsible for the company’s financial woes.

NorthWestern is attempting to reorganize as a utility serving customers in Montana, South Dakota and Nebraska, shedding non-utility businesses that lost hundreds of millions of dollars.

Source: Montana newspapers

Utilities Sued Over Lease Payments for Dams

(October 22) A federal lawsuit by two Bozeman residents says PPL Montana, Avista Corp. and PacifiCorp owe Montana decades of lease payments for their hydroelectric dams, which sit on state-owned riverbeds.

The companies have never paid for use of the land, and it's time to calculate back payments and interest due to the state school trust, the designated beneficiary of state lands, say Richard Dolan and Denise Hayman.

They brought the lawsuit "on behalf of the state, (their) children, the public school fund and all other beneficiaries of the school trust," says the complaint, which was filed in U.S. District Court at Missoula.

The suit lists no dollar amount, but asks for payment dating back to initial construction of the dams, some of which are 90 years old. It also asks for damages for trespassing and "unjust enrichment."

PPL Montana spokesman David Hoffman said he wouldn't comment until he can review the complaint.

PPL Montana and other companies that own hydroelectric projects on Montana rivers pay leases to the federal government, but have never paid lease money to the state.

The lawsuit argues that state officials and the state Land Board have "failed to fulfill their constitutionally imposed duty" by not charging lease payments on the dams. The suit is filed under the "private attorney general theory," meaning a private citizen is taking action to force state officials to do a job they've allegedly failed to do.

Bloomquist said attorneys involved with the case began researching the issue partly in reaction to PPL Montana's property-tax protest for the dams and increasingly frequent objections to water-rights petitions.

PPL Montana, which owns 11 hydroelectric dams in Montana, last year protested the property taxes on the dams. The protest tied up millions of dollars that normally go to local governments and the state. In its protest, PPL Montana argued that the dams are vastly overvalued, and that its taxes should be millions of dollars lower.

That directly contradicts PPL Montana's arguments during its 2002 campaign against a voter initiative to examine whether the state might condemn and purchase the dams, to sell power to the public at reduced cost.

PPL said the state couldn't afford to buy the dams, because they're worth much more than the value attached by state appraisers. The company filed the tax protest shortly after voters defeated the initiative.

Source: The Billings Gazette

PSC Requests Special Legislative Session Over NorthWestern Bankruptcy

(October 22) The Montana Public Service Commission has voted to ask Gov. Judy Martz or lawmakers to call a special legislative session to authorize the agency to spend money on outside experts to represent consumers in NorthWestern Corp.'s bankruptcy proceedings.

The vote was 3-2, but Martz said she still sees no reason to call a special session at this time.

If 76 of the 150 lawmakers agree, legislators can call themselves into session. However, that has happened only once since legislators gained that power in 1973.

Commissioners expressed frustration over their inability to gain authority to spend more money to actively participate on behalf of the state in the high-stakes Delaware bankruptcy proceedings. The PSC is funded by a tax on regulated utilities that only the Legislature can adjust.

The only money now available is the PSC's $53,000 contingency fund to cover all of the agency's unexpected costs over the next 21 months and $48,000 in leftover money from the previous fiscal year. That's far short of the $1.15 million minimum that PSC Chairman Bob Rowe, D-Missoula, believes is needed through mid-2004. He estimates that a financial adviser would cost $900,000, while an outside lawyer would cost $250,000 over eight-plus months.

In contrast, Rowe said NorthWestern spent $7 million on outside attorneys and financial advisers before filing bankruptcy and has averaged $1 million a week on these expenses since filing.

State Budget Director Chuck Swysgood, who met with PSC officials Monday, has approved authorizing the PSC to spend the $53,000 and $48,000 to participate in bankruptcy proceedings. The PSC can spend this money until Martz decides whether to allocate any of the remaining $23 million in unexpected federal funds for that use. No decision is likely until mid-November.

Source: The Billings Gazette

PSC Votes to Hire Law Firm To Help with NorthWestern Bankruptcy Proceedings

(October 8) With the NorthWestern Corp. bankruptcy proceedings moving quickly, the Montana Public Service Commission voted unanimously Tuesday to hire a Madison, Wis., law firm to represent it, despite uncertainty over funding.

The PSC first needs the formal approval to hire an outside attorney from a three-member state committee, headed by state Budget Director Chuck Swysgood. The group turned down an earlier request. The total costs of an outside counsel could run from $200,000 to $500,000, the PSC application said.

The commission was scrambling Tuesday to come up with money to hire an outside lawyer and financial consultant. One possibility raised by the PSC staff was to seek a special legislative session to authorize the extra spending.

For now, the commission is limited to spending the $53,000 from its consulting budget on the outside law firm.

Commissioners are hoping the Delaware bankruptcy court, with NorthWestern's support, will authorize the PSC's legal and financial consulting fees to be paid by the company so the commission can fully participate in the proceedings.

The Wisconsin law firm would be paid what Rowe called a ‘‘blue-light special rate'' lower than its usual fees. Its fee would be $250 an hour per attorney and $110 an hour for each paralegal or staff person working on the case, plus expenses. The contract calls for the outside counsel to work closely with a two-attorney PSC team.

This legal fee is relatively cheap in the costly world of bankruptcy. Robin McHugh, the PSC's chief lawyer, said NorthWestern is paying its lead bankruptcy attorney a rate of $710 an hour.

The PSC has hit roadblocks in seeking funds to pay for an outside attorney and financial consultant.

Last week, Valencia Lane, a Legislative Services Division attorney, concluded, in an opinion for the Legislative Fiscal Division, that the PSC and the Montana consumer counsel are restricted in how they can increase their spending authority. Both agencies are funded by a tax on utilities.

Lane said neither agency can use the budget amendment procedure, a standard way for other state agencies to spend unanticipated money received from other sources such as federal money. Nor can either agency spend the money now and then seek supplemental appropriations from the 2005 Legislature to cover the extra spending.

Rowe said he is talking with his counterparts in South Dakota and Nebraska, the two other states where NorthWestern has utility operations, to see if the three states can combine forces. But at this time, Montana has a much greater stake in the proceedings, he said.

Source: Helena Independent Record

State Regulators will Continue NWC Probe

(October 3) On Oct. 1, the Montana Public Service Commission (PSC) voted unanimously to oppose any attempt by the U.S. Bankruptcy Court in Delaware to halt the commission’s investigation into NorthWestern Corp.’s finances.

On Aug. 21, the PSC, at the urging of the Montana consumer counsel, voted to launch the financial investigation of debt-ridden NorthWestern, the parent company of NorthWestern Energy. NorthWestern Corp. filed for Chapter 11 bankruptcy reorganization on Sept. 14. It has contended that this bankruptcy filing automatically and immediately "stays," or holds in abeyance, the PSC financial inquiry and other proceedings.

NorthWestern said it would voluntarily provide some of the information sought by the PSC and Montana consumer counsel in the inquiry. However, the PSC staff said NorthWestern completely failed to answer several questions and its responses to some others were insufficient.

Consumer Counsel Bob Nelson filed an 11-page letter with the commission on Oct. 1 arguing that the PSC investigation should proceed. "The commission’s investigation remains relevant and should be continued, notwithstanding (NorthWestern Corp.’s) bankruptcy," Nelson said. "The commission must ensure that (NorthWestern Energy) is meeting its public service obligations, and a bankruptcy filing does not have any effect on the commission’s statutory requirements to undertake such a task. Fundamentally, (NorthWestern’s) bankruptcy and the events leading up to it demonstrate the need for enhanced regulatory oversight over public utilities in this state," he said.

Until the PSC gets a detailed history documenting the causes of NorthWestern’s financial conditions, "the commission will be handicapped in its efforts to protect the public interest in safe, reliable and adequate public utility service by ensuring that (NorthWestern’s) economic misfortunes are not revisited on it, or any other public utility in this state, in the future," Nelson said.

Source: Lee State Bureau

Utility Officials Say Money for Conservation and Low-Income Assistance
Shielded During Bankruptcy

(September 24) NorthWestern Corporation officials say they are confident that the pool of money the utility has set aside for energy efficiency and renewable energy programs and for helping low-income households will be shielded in court.

CEO Gary Drook told the Montana Public Service Commission that the funds from the Universal System Benefits (USB) are secure because they are in a separate account. However, according to another utility official, the funds are still part of the corporation’s general fund. Pat Corcoran, NorthWestern Energy’s vice president for regulatory affairs, said even though these funds are not separated from the corporate checkbook, they are safe under what is called a constructive trust. "In essence, it’s protected from the (bankruptcy) estate, and the judge has issued an order approving that," Corcoran said.

USB money comes from an assessment added to each ratepayer’s utility bill, called the universal system benefits charge. The $8.2 million fund is paid for by NorthWestern Energy’s 295,000 electric customers. This year, $1.8 million of that will go toward low-income energy assistance.

Recipients of the USB funds had asked the PSC to order the company to place the funds in an escrow account. The Commission agreed and issued an order.

However, on September 11, the day before the PSC’s order was to take effect, NorthWestern objected to separating the funds. The company filed for bankruptcy four days later.

PSC chairman Bob Rowe said that since NorthWestern’s financial situation has deteriorated, requiring a separate account made more and more sense. He said he is comfortable now that the bankruptcy court has ordered the USB payments to continue.

Source: The Billings Gazette

State Officials Want a Seat at NorthWestern's Proceedings

(September 19) Attorney General Mike McGrath said Tuesday he is talking with other state officials about making sure Montana has a seat at the table and some clout in NorthWestern Corp.'s bankruptcy proceedings. NorthWestern filed for Chapter 11 bankruptcy protection on September 14 in Wilmington, Delaware.

The South Dakota company racked up $2.2 billion in debt during an overly ambitious expansion into nonutility industries. The company said its reorganization could take up to 18 months. The first step is for creditors and the bondholders to form committees to protect their investments.

The state would try to obtain a seat on one of those committees, which will drive the course of the bankruptcy. "Hopefully, it's doable, and yes, it is a good idea," McGrath said. "We have been looking at utility bankruptcy filings around the country, and there haven't been that many."

Since Montana got involved in restructuring utilities in 1997, there has been an ongoing debate about what the state's authority is. That debate continues in bankruptcy.

McGrath said officials are studying other companies that have faltered. "What has happened in other states is the state government has been given 'party in interest' status, which is not the same thing as being a creditor," McGrath said. With that status, he said, Montana at least would have some influence over the proceedings.

Gary Buchanan, a Billings bond expert and former state Commerce Department director, has been urging Montana to get some legal standing in NorthWestern's meltdown since July. He said he has been frustrated that state officials haven't acted more aggressively. "This state can't roll over and play dead this time," he said.

Source: The Montana Standard

Montana’s Largest Utility Declares Bankruptcy

(September 16) NorthWestern Corp., parent company of Montana’s largest utility, has filed for Chapter 11 bankruptcy protection in Wilmington, Del., after an aggressive expansion plan failed and heavy debt overtook the utility. Also Monday, the New York Stock Exchange suspended trading and is kicking NorthWestern off the exchange.

NorthWestern's bankruptcy came just 19 months after it paid $1.1 billion for the transmission and distribution assets of Montana Power. The bankruptcy means nearly 10,000 investors who owned the company's common stock are wiped out.

NorthWestern's future will be decided by creditors and bond holders in bankruptcy court. The company is truly reorganizing, NorthWestern Chief Executive Gary Drook insisted. He said NorthWestern is not alone; other utilities also have filed for reorganization, including El Paso Energy in Texas and Pacific Gas and Electric Co. in California.

Drook said officers are designing a reorganization plan that will be presented to the court in the next few months. "Unfortunately, Chapter 11 is not a quick process. We're looking at a year to 18 months," he said.

Half of NorthWestern's debt is relatively current, about $1 billion borrowed to buy Montana Power. The other half came during the last eight years when the regulated South Dakota utility, formed in 1923, decided to aggressively diversify by buying more than 100 companies.

Its three main ventures - CornerStone Propane, Blue Dot Services (heating and ventilating) and the telecommunications company Expanets, were never profitable and bled millions from the parent company.

In addition, the U.S. Securities and Exchange Commission is investigating NorthWestern, and the corporation faces a handful of investor lawsuits claiming managers misrepresented the company's true finances. Last March, the company stunned investors by restating its books for nine months last year. The move turned an expected $1.53 per share earnings into a $30.04 per share loss.

Drook insisted Montana utility customers won't be left paying for the company's problems because debt will be dismissed in bankruptcy.

Gary Buchanan, a Billings resident and longtime critic of Montana's experience in restructuring Montana Power, is critical of the bankruptcy filing. In July, the Billings bond expert met with Gov. Judy Martz, Attorney General Mike McGrath and the Public Service Commission. He talked about the need to prepare for a NorthWestern bankruptcy.

Buchanan said Monday that the worst mistake Montana politicians made was allowing the corporation to knock down the firewall keeping Montana's utility assets from getting tangled up in the parent's financial problems.

"They should have protected these assets. They gave them away," Buchanan said.

Drook assured customers in South Dakota and Nebraska - and 300,000 electricity and natural gas customers in Montana - that the lights will stay on and the natural gas will continue to flow.

Michael Hanson, chief of NorthWestern Energy, also said utility customers can expect normal service.

Northern utilities have their best months in the winter when revenues increase, so NorthWestern expects better cash flow in the coming months.

Source: The Billings Gazette

Consumer Counsel Investigates PPL Monopoly Rate

(September 2) State authorities are pushing federal regulators to force PPL Montana to sell cheaper electricity in Montana.

Over the past 12 months, the state's Consumer Counsel and attorneys hired by the office have been trying to get the Federal Energy Regulatory Commission to revoke PPL Montana's "market-based rate authority."

PPL Montana, the major supplier of electricity for the state after buying the former Montana Power Co. power generating units, could be forced to charge its Montana customers much lower, cost-based prices for wholesale power.

The Consumer Counsel’s office argues that PPL owns and generates more than 90 percent of the power sold in Montana's unregulated market, controlling a near monopoly over in-state wholesale power sales, and cites spiraling energy costs in the state as an example of abuse of the monopoly.

PPL sells up to 450 megawatts of wholesale power to NorthWestern Energy, the state's largest utility, with nearly 300,000 retail electric customers. NorthWestern Energy is a division of NorthWestern Corp., a South Dakota firm on the verge of bankruptcy.

The two companies bought different pieces of the now-defunct Montana Power Company.

Nelson said his office will file an analysis later this year to back up his claims that PPL Montana does have "market dominance" in Montana, and that no real competition exists. He said federal regulators have been cracking down on firms caught manipulating energy prices in the West, and thinks the time is ripe to go after PPL.

Source: Montana newspapers

Montana Task Force Tags $1.7M to Help With Heat Bills for Low Income

(August 28) At a meeting held August 27, a governor-appointed committee, looking for ways to help Montana's poor cope with winter heating bills in the wake of big rate increases, has found a pot of money to do just that.

The Consumer Energy Protection Task Force recommended NorthWestern Energymake $1.7 million in excess money collected from special tax on consumers' monthly bills available for programs to help low-income residents.

On September 12, the task force will meet again with Northwestern Energy officials who will give recommendations on how that money should be divided between home weatherization projects to reduce energy use and financial help to pay electricity and natural gas bills.

The money comes from an assessment added to each utility bill, called the universal system benefits charge. It raised almost $11 million last year, with about $8.2 million paid just by Northwestern Energy's 295,000 electric customers.

The money is used for a variety of programs, including help for poorer ratepayers and energy conservation projects.

Source: Associated Press

State Regulators to Probe NWE's Finances

(August 21) The Montana Public Service Commission (PSC) will launch a full investigation into the finances of NorthWestern Energy and the books of its troubled parent company, NorthWestern Corp.

Reached by a unanimous vote at a PSC meeting on August 19, the decision came at the recommendation of Bob Nelson, a state lawyer representing consumers. Nelson last week asked the PSC to not only launch the investigation, but to also consider ordering the company to separate its profitable utility company from the money-losing NorthWestern Corp.

The commission's main goal is to make sure the problems of NorthWestern Corp. don't infect NorthWestern Energy, which serves about 300,000 Montana electric and natural gas customers, said Commissioner Tom Schneider. His concern is that the parent corporation might scrimp on maintenance of Montana power lines or drive up Montana utility rates to cover the losses of its parent corporation. He's also concerned that the NorthWestern Corp.'s bleak financial picture might make it more difficult for the utility company to buy natural gas or borrow money cheaply.

Rowe said the investigation will look closely at how -- or if -- money is moved around inside NorthWestern Corp. The investigation is a natural continuation to a series of orders the PSC has given the company in an effort to keep Montana customers -- and the property NorthWestern owns in the state -- from being harmed by the company's finances he said. The commission has already ordered the company to sell its unprofitable side businesses, to maintain its Montana property and to produce a report on NorthWestern's natural gas purchases.

A year ago, the company seemed healthy and its stock was selling for $16.48 a share. In recent months, however, its stock prices have taken steep, steady declines. NorthWestern stock closed Tuesday at 61 cents a share.

PSC Commissioner Tom Schneider said that even if the company files for bankruptcy "the lights will still turn on, but it's how that's done and at what cost," that concerns him.

Roger Schrum, a NorthWestern spokesman in South Dakota, said the company will cooperate with the investigation, but it won't turn over any information it isn't required by law to share. He said the company has no intention of isolating NorthWestern Energy from its parent company and doesn't believe the PSC has the authority to make the company do so.

Source: Billings Gazette

PSC Seeks to Limit NorthWestern Debt

(August 18) The Montana Public Service Commission on Monday petitioned the federal government to impose conditions that would protect Montana consumers as NorthWestern Corp. tries to boost its debt level and issue more stock.

PSC staff attorney Martin Jacobson wrote a letter Monday to the Federal Energy Regulatory Commission expressing concern over the company's heavy debt. NorthWestern and NorthWestern Energy are "not in a financial condition that would justify unqualified or uncontrolled approval of additional indebtedness and stock," Jacobson wrote.

After reporting a loss last week of almost $58 million for the second quarter, the company talked of bankruptcy as a near-term possibility. Its chief financial officer resigned, and the company's stock has been trading mostly below $1.

NorthWestern has asked FERC's approval to issue up to $775 million in additional debt and up to 200 million shares of common stock. The company has just under 38 million shares of common stock outstanding now. NorthWestern also wants FERC's permission to issue 50 million shares of preferred stock.

Investors are being asked to approve the changes during the next annual meeting Aug. 26 in Sioux Falls, where NorthWestern is headquartered. The conditions would make sure NorthWestern spends the money made by issuing new debt only on the utility, not on its unrelated side businesses. Other conditions say if any utility assets securing NorthWestern's debt are sold, that money must also be used to pay down debt.

NorthWestern has said it only needs FERC approval to take on more debt and sell more stock. However, the commission disagreed.

"The Montana PSC has specific authority over public utility issuance of securities," Jacobson wrote.

"The Montana utility customers can't be held responsible for the debts this company racked up for its other businesses" according to Commissioner Greg Jergeson, D-Chinook.

Source: Billings Gazette

Public Power Urged as Last Good Option

(August 7) Former state Commerce Director Gary Buchanan is urging formation of a statewide electric cooperative to take over NorthWestern Energy's utility business in Montana. A strong critic of deregulation, Buchanan says such a co-op is the state's last chance to escape from the problems that followed deregulation of the electric utility industry.

He wants state officials to take a "brass-knuckles approach" in dealing with NorthWestern Energy and its parent company, NorthWestern Corp. The South Dakota company is struggling financially, and Montana utility regulators are openly discussing the consequences if NorthWestern were to file for bankruptcy.

Montana rural electric cooperatives and a group formed by some Montana cities were among the competitors bidding to buy Montana Power Co.'s utility business. Montana Power sold its utility business to NorthWestern last year for $1.1 billion. NorthWestern paid $602 million in cash and assumed $488 million of MPC debt.

Buchanan said cities on their own or through the Montana League of Cities and Towns could work with rural electric cooperatives to buy the company. Although some politicians will say that government has no business in running a utility, Buchanan called this a naive view. There are 2,000 communities across the country served by public power, Buchanan said, including Los Angeles and the state of Nebraska.

Montana voters, by a 68 percent to 32 percent margin, rejected a proposal last year for the state to buy Montana Power's power-generating dams. Buchanan thinks the proposal would pass now because voters are so angry.

NorthWestern recently got state approval to raise its natural gas rates by 35 percent, on top of a 35 percent hike in December, and to boost its electricity rates by 14 percent.

"I think the Montana public feels bamboozled," Buchanan said. "They don't like companies that don't pay taxes, they don't like companies that break their contracts, and they don't like companies that aren't straight with our elected officials."

Source: Montana newspapers

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Last Updated: 11/25/2003