HomeMy WebLinkAboutYVEC INC
Dear Member / Owner:
In the next few days, a press release will be given to Montana's major newspapers, announcing the
formation of a generation and transmission cooperative and Yellowstone Valley Electric Cooperative's participation
in a proposed coal-fired generating plant. This announcement will also appear in this month's issue of the Rural
Montana magazine.
Yellowstone Valley Electric Cooperative (YVEC) has helped form a generation and transmission cooperative
called Southern Montana Electric Generation and Transmission Cooperative (SMEG&T). This Cooperative is made
up of five surrounding rural electric distribution cooperatives located in the central, south central, and southeastern
part of Montana. The City of Great Falls, which is in the-process of forming a municipal utility, is also a member of
SMEG&T and will also be a part owner in the planned generation project. The generation and transmission
cooperative formation was developed because of a common power supply need amongst the founding members.
The participating electric cooperatives all have power supply agreements with the Bonneville Power Administration
that begins to diminish in 2008 and completely expires in 2011. Since eighty percent of our Cooperative's power
supply is received from Bonneville, the search for replacement power supply began nearly two years ago. Our
Cooperative has a power supply contract with Western Area Power Administration that expires in the year 2020
and supplies the remaining twenty percent of our power needs.
Over the past two years, your Board of Trustees has investigated and analyzed several power supply
options, ranging from future power supply agreements beyond the year 2008 to being a part owner in a power
generating plant. The closer our Cooperative looks at the various power supply options, the more attractive equity
ownership in a long-term power plant seems to become. Rather than relying on the volatile electricity market for
future power needs, our Cooperative is investigating and performing due diligence work on the cost, risk, and
benefits of owning our own power supply resource. In addition to the power supply resource question, YVEC is
also considering its transmission needs to bring the power from the generating plant to our Cooperative's service
area.
The power plant project that YVEC is studying is a "clean coal technology" electric generating facility that
will be located in eastern Montana. The proposed power plant is to be constructed next to the coal resource,
which will significantly reduce the plant's fuel cost. Initial studies have indicated that the proposed generating
facility will be amongst the lowest cost coal-fired power production plants in the region and will offer long-term
future rate stability to our Cooperative's members. The SMEG&T is working with potential ownership partners in
the Northwest that will provide Icad following, marketing, and scheduling services. This will enable the generating
facility to generate as efficiently and economically as possible. Back up power supply arrangements are an
important factor and are being investigated. A lot of study and analysis remains to be done. If the project moves
forward, it is contemplated that the plant construction will begin within two years.
This is an important project for YVEC to consider because our power supply cost is nearly $6.5 million
annually and represents approximately half of our total operations and maintenance costs. An independent
economic study, that our Cooperative commissioned, is nearing completion and will provide guidance in
determining whether it would be better to rely on power purchase agreements (market priced power) or own a
portion of a generating plant for our Cooperative's future power supply needs. You can be assured that the
decision your Board of Trustees makes will be in the best long-term interest of the members of YVEC and will take
into consideration the financial impact to our Cooperative.
Sincerely,