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PPL Montana has $23M quarter
Gazette State Bureau

HELENA – PPL Montana reported profits of $23 million for the quarter ending June 30, less than one-third its first-quarter profits but significantly higher than what it posted a year ago, documents filed with the Securities and Exchange Commission show.

The Pennsylvania-based company, which bought most of Montana Power Co.'s generating assets in 1999 for $767 million, has profited handsomely by selling some of its power into wholesale markets when there was a shortage of electricity and prices rose astronomically. Wholesale power prices have dropped significantly in the past three months.

The report, filed Friday by PPL, showed that PPL Montana's second-quarter profits reached $23 million, compared with a $1 million loss over the same three-month period ending June 30 last year.

For the first six months of this year, PPL Montana registered profits of $100 million, buoyed by the $77 million in profits it made the first quarter. That's 14 times higher than the $7 million in profits PPL Montana reported for the first half of 2000.

PPL spokesman Dan McCarthy of Allentown, Pa., said the profits fell for several reasons during the April through June quarter.

“Second quarter (electricity) use drops off because of maintenance and better weather,” he said in a telephone interview. “The same thing is true all of the Western market. The price also has dropped.”

He added that PPL Montana has an obligation to provide electricity at “below market prices” of $22.25 per megawatt hour to Montana Power Co. for its 288,000 residential and commercial customers until June 30, 2002. That was a condition of the sale.

PPL Montana is contractually required to sell about two-third of its power to Montana Power and is free to sell the remainder in the wholesale power market in the West.

As PPL temporarily closes power plants for regular maintenance, a higher percentage of PPL's power is sold to Montana Power at lower than market prices, McCarthy said.

Through the first six months of 2000, PPL Montana had registered profits or net income of $7 million, vs. the $100 million this year. However, its profits soared after mid-2001 when the power shortage hit the West and prices skyrocketed.

Last year, PPL Montana reported almost $87 million in profits, with $68.7 million coming in the final three months of the year.

It was those high profit figures that prompted several state legislators earlier this year to introduce excess-profit tax bills aimed squarely at PPL Montana. Some sponsors said they would drop their bills if PPL would come to the table and offer cheaper power to Montana industries and to Montana Power in the future.

None of the excess-profits wound up passing.

In a deal announced the day before the 2001 Legislature adjourned, PPL Montana agreed to sell 500 megawatts of electricity to Montana Power Co. for $40 per megawatt hour for five years. Officials from both utilities said this price was below the market at that time.

The deal was contingent on lawmakers on the final day killing an excess profits bill and passing another bill that guaranteed Montana Power full-cost recovery for any power it purchases. Lawmakers did just that as the two utilities requested.

The third condition was that the state Public Service Commission drop attempts to reregulate PPL Montana and the price of power it sells to MPC. The PSC refused to buckle and has asserted its authority to regulate both MPC and PPL. In a pending case, PPL has filed a lawsuit in federal court challenging the PSC authority.

The power deal remains in limbo as PPL has signed it, but MPC hasn't, with a deadline looming today.

“We don't have any indication they're going to sign,” McCarthy said.

Updated: Wed Aug 15 16:44:50 CDT 2001 Central Time
Copyright © The Billings Gazette, a division of Lee Enterprises.

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