PPL charges Montana regulators violating 'federal law'


By the OGJ Online Staff

HOUSTON, June 26 -- PPL Corp., Allentown, Pa., said it is considering its legal options after Montana regulators ruled power plants it purchased from Montana Power Co. are still subject to regulated rates.

In a statement Tuesday, PPL said the Montana Public Service Commission's (PSC) actions are "clearly in violation of federal law. We bought these power plants in Montana with the understanding that they would operate as merchant plants, selling electricity into western wholesale markets -- at market-based prices," said Joanne Raphael, PPL vice-president, external affairs.

PPL Montana, a subsidiary established by PPL in 1999, operates two coal-fired power plants and 11 hydroelectric facilities in the state. PPL Montana has about 1,150 Mw of generating capacity in the state.

She said the state has "no authority" to direct PPL Montana, a unit of PPL Corp., to sell electricity at a given price. David Hoffman, utility division administrator for the Montana PSC, said the commission Tuesday ordered Montana Power to submit information to set rates, and, if it did not, rates would remain at 2.5¢/kw-hr.

Montana's restructuring law gave the commission rate-setting power until it has declared the market workably competitive or July 2007, Hoffman said. PPL must have "overlooked that portion of the statute when they purchased [Montana Power] assets," he said. The PSC has taken the position completion of the asset sale is contingent on completion of the transition period, he said.

Montana Power filed its transition plan in 1997, but the PSC proceeding to consider the plan is still under way and no final order has been issued.

Despite an attempt by the PSC to construct some legal basis for authority to dictate the terms under which PPL sells electricity generated at its Montana facilities, Raphael said there simply is "no legal justification" for such a conclusion.

"If the PSC continues to pursue this misguided reasoning, we would be forced to pursue a challenge to such an illegal action," she said. Raphael said PPL will review the written PSC order and then consider its legal options.

She said PPL has offered to supply Montana Power with 500 Mw of power produced by PPL's plants at 4¢/kw-hr for 5 years. PPL already has signed an agreement providing for this power supply and is awaiting signature from Montana Power, Raphael said. That contract must be approved by the PSC.

Since PPL Montana purchased the Montana plants, it has been supplying Montana Power with electricity at less than 2.5¢/kw-hr, the rate the PSC said is still in effect.

In addition, PPL Montana noted it has provided 20 Mw of below-market-priced electricity to a state-established power pool for industrial customers and is the only company providing electricity to the pool.

PPL Montana operates the Colstrip and Corette generating plants and 11 hydroelectric facilities in the state.

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