HomeMy WebLinkAboutLeague - NorthWestern Energy Montana League of Cities and Towns
P- O. Box 1704 - Helenc~ Mt 59624
406 442-8768 (Phone)
406 442-9231 (Fa~)
Memorandum
To: Cities and Town~ inthe Energy Supply Program
From: Alee Hanson ~'~ ~
Mike Kadas ~ ,~
Subject: Noxthwestem Energy Marketing Contract
Date: lune 30, 2003
NorthWestern Energy Marketing lms advised the League of Cities and Towns of its intern
to breach the power supply contract that vms negotiated last year between the company
ami municipal governments and school districts across the slat~ NorthWemern claims
that it does not bare the cash or credit necessary to acquire power supplies for municipal
and school accounts pursuant to the terms and conditions of the contract
Cities, towns and school dislricts covered by the contract are required to return to the
default supply to assure the unitized supply of power to municipal and school
facilities. Our attorneys have advised us that the return to default supply will not impinge
on any rights ~o pursue legal damages or a negotiated settlement with NorthWestern
Energy Marketing. Our return is not voluntary. Instead, it is considered a mitigation of
damages resulting from Northwestern's intended breach of the contract,
Under default supply, cities and towns will pay the same rates for electricity as the other
customers of NorthWe~ern ~. The difference between the current default rate
(which is $37.70) and the contract price (which is $33.11) is about $4.60 per megawatt
hour, or nearly $300,000 per year for tho total of affected municipal loads. Tiffs
difference between the default supply rotc and the con~ract price could/ncrease to as
much as $10.00 per megawatt hour if the Public Service Commission approves a rote
increase requested earlier tlxis month by the utility.
We are discussing ~he possibility of s financial settlement with NorthWestern to
compensate cities and schools for the company's intended breach of contract. If these
efforts are unsuccessful, we can file a lawsuit for damages or pursue our claims in a
likely bankruptcy proceeding.
The return to default supply will increase electricity costs for cities and towns by as much
as $2-million over the four years ~at would have been covered by the lower rates in
contract. This is a lot of money in fighx budgets and we would hope to recover all or a
reasozmble portion of tiffs a~ount through negotiation or legal action.
Unfornmat~ely, defending the value of our previously negotiated contract will result in
eddilional legal expense. We amieipate that these eost~ will be charged back to the
participat[og cities, as ha~ been done in the past, based on the elec~city consumption of
the individual cities. We will also ask the School Boards Association to pay a sbare of
the legal costs.
If you have any questions about this memorandum orthe issue of legal costs, please
contact the League of Cities as soon az possible.
Report 1
GOVERNMENT AMOUNT
City of Billings 1896
City of Bozeman 876
Butte-Silver Bow County 2360
City of Conrad 60
City of Deer Lodge 135
City of Glasgow 225
City of Great Falls d 812
City of Harlem 60?
City of Havre 625
City of Helena 972
City of Malta 120 c~-
Town of Manhattan 26
City of Missoula 948
Town of Plains 36
Town of Sheridan 72
Town of Superior 48
City of Three Forks 48
City of Laurel 480
City of Livingston 348
Town of Darby 36
Town of Cascade 25
Town of Bridget 60
City of East Helena 84
City of Hardin 95
City of Hadowton 36 v
City of Red Lodge 36
City of Roundup 96
City of Chinook 120
12000
t/'~ 'd ;OOL'ON SNA~OI ~ S31113 JO ~llgV~l LIN RdL[:; SO0~ 'O~'unr