Aug 25, 2003
The Montana Public Service Commission recently ordered the NorthWestern Corporation, a giant regional power distribution company, to provide it with more information on how it sets prices and distributes revenues among its affiliates in several states.
The commission's concern is a bit late. Since 1997, electricity prices in Montana have doubled, redoubled and then doubled again. In 1997, the Montana Power Company got state politicians to approve deregulation of the state's electric power industry. Under the leadership of Montana Power CEO Bob Gannon, and with the assistance of Wall Street investment banking firm Goldman Sachs, within six months of the passage of deregulation, Montana Power began selling off its hydroelectric dams, coal mines and power plants to Pennsylvania Power and Light Company. Next it sold off its electric transmission and distribution system, getting out of the electric power business entirely. All these assets brought a handsome price since the buyers were now free to charge higher deregulated prices for electricity.
With Montana Power no longer in the power business, Pennsylvania Power and Light and other electric suppliers jacked up the price of power in the state. Electricity rates soared. Companies went out of business. Workers were laid off. The former manager of the now-closed Butte copper mine recently said, "If we were going to continue to run, we were faced with prices... five to 20 times what we were paying before."
As for Montana Power, its executives took the 2.7 billion dollars they had received by selling its assets to set up a subsidiary, Touch America, to lay a 26,000 mile network of fiber optic cables.
When the stock market bubble that Touch America was riding on burst, the price of Touch America's stock crashed along with other dot.com stocks. Thousands of Montana Power retirees, whose lives depended on the value and earnings of the stock in their 401k retirement plans, suddenly had no retirement plans. Many had to go back to work.
After laying off half of its employees, Touch America filed for bankruptcy this past June. But not before giving Bob Gannon and the other executives a 5.4-million-dollar bonus and Goldman Sachs a 20- million-dollar commission. The same Goldman Sachs that is currently under investigation for its role in the Enron scandal. The same Goldman Sachs that since Enron went down has itself become a major trader in the energy markets.
So the Montana Public Service Commission is a little late, to say the least, in being concerned about the operations of electricity suppliers in the state.