Electric City Power, Incorporated

AMENDED JOURNAL OF BOARD PROCEEDINGS

April 7, 2008

Electric City Power, Incorporated (ECP): Regular meeting of the Board of Directors Great Falls Civic Center, Gibson Room

CALL TO ORDER: 5:30 PM

ROLL CALL: Directors present: Chairman George Golie, Bill Ryan and Bob Pancich. Also present were the ECP Executive Director, City Manager, Assistant City Manager and the City Clerk.

EXECUTIVE DIRECTOR REPORT

Executive Director Coleen Balzarini updated the Board on the following:

Ms. Balzarini explained that the Electric Utility Related Commission Actions – Table of Contents - was a list of actions taken by the City Commission since Electric City Power was created. In addition, it lists the contracts and agreements with Southern Montana Electric. Chairman Golie asked if there were any questions or discussion amongst the Board. No one responded.

Ms. Balzarini reminded the Board the Co-Gen tour at the Wastewater Treatment Plant was scheduled for April 9, 2008, at 3:30 p.m.

Southern Montana is going forward with its rating and has spoken with two different rating agencies. Ms. Balzarini explained that the information in the worksheet is an example of what the rating agencies are asking for as they do their due diligence on the project. Gathering neutral, third party input from the financial market is a way for rating agencies and underwriters to determine whether a project is good or not and whether it is a financially beneficial thing to do. The worksheet consists of 21 data requests with sub-items.

Chairman Golie inquired when all the criteria were finished would it be made available to the committee members and the public. Ms. Balzarini responded that she was not sure.

Ms. Balzarini informed the Board that Electric City Power has been approached by a large customer that has already been receiving 5 megawatts of power from another supplier. She explained that there is electricity available to provide and this proposed customer is interested in a long term relationship. Ms. Balzarini requested feedback from the Board. Chairman Golie stated that the business is not currently located in Great Falls, but is looking to expand. He inquired if providing them with cost effective power would encourage them to expand to Great Falls. Ms. Balzarini responded that it gives ECP an opportunity for that. The reason they are looking at Great Falls is because it fits their business model. They certainly want to have electricity at favorable rates and their choices are somewhat limited.

Mr. Pancich asked if this business would be requiring uninterrupted power. Ms. Balzarini answered that the agreement will provide them with the assurances that ECP will provide electricity above and beyond what they contracted for in the event it is needed to operate the facility. If it is above the 5 megawatts, they will pay whatever the cost is to get that power.

Bill Ryan stated that this helps to negotiate power contracts at lower rates.

Bob Pancich echoed Mr. Ryan’s comment and stated the more customers ECP has to show repayment ability the better. He stated his belief that it is good to pursue contracts of this nature.

Chairman Golie added that it also provides economic development and an expanded tax base.

Motion for Executive Director to Proceed with New Large Customer Proposal. Bill Ryan moved, seconded by Bob Pancich, authorizing Executive Director Coleen Balzarini, as a representative of Electric City Power, to proceed with a proposal for a new large customer. The motion was unanimously approved by the Board.

Tim Gregori provided a PowerPoint presentation and update regarding the development of the Highwood Generating Station. Mr. Gregori discussed the member system needs and the justification for the facility. He stated that there is a fair amount of misinformation as to what the size of Southern Montana’s load is, where their load is growing, and what the requirements of the members are. SME continues to be approached by a number of relatively large potential customers that have been following this project. They have seen the benefits that appear to manifest themselves in the idea of a local group of folks owning their own electricity supply and having control over what the rate making process would be to price that electricity and how that electricity is going to be there on a reliable, cost basis for the members that SME serves.

Mr. Gregori showed Southern Montana’s service territory, and the five rural distribution co-ops that were members of Central Montana that formed Southern Montana. The reason Southern Montana was formed was because of the rate disparity that existed between the members in Central Montana. The eight members that stayed at Central Montana have long term contracts with Basin Electric Power Cooperative and the Western Area Power Administration. The Western Area Power Administration contracts are not available for any additional power in the future. The WAPA allocation is totally allocated with a fixed amount. The Basin contract goes out to 2048. When SME looked at the source of that power, particularly the fact that they are lignite-fired coal facilities in North Dakota, it discovered in many instances they did not even have some of the state of the art facilities for pollution control. And, the fact that it was supporting the economy in North Dakota, (they) felt it was time Montanans took a look at their power supply to see if we could build something in Montana that was cost effective, more environmentally compliant, was located in the State of Montana, and was not bound by a restriction of getting power into the State of Montana.

Mr. Gregori stated that there is an important electric facility in Miles City called the Miles City AC-DC-AC Tie, which is a long name for alternating current power, transforming it to direct current power and then back to AC power. The reason it exists is the area from Fort Peck through Miles City represents the boundary between the Mid-West Independent System Operator and the Western Electricity Coordinating Council, of which most of Montana is a member. Basin’s facilities are on the east side of the DC Tie, and physically they are separated from our electric grid. There are two things to consider. First, in order to buy from those facilities you have to turn around and buy reserves on the other side of it, and secondly, there is no transmission pass today to get that power in because the AC-DC-AC Tie is fully subscribed. If we were going to buy power from Basin, we would have had to first pay to upgrade the Miles City AC-DC-AC Tie; secondly, there would have been transmission upgrades either coming from North Dakota or Wyoming; and thirdly, we would have had to pay for significant transmission upgrades inside Montana on the NorthWestern Energy system so the power could flow. When we took a look at that economic analysis and the fact that we had this power supply need, the five member coops decided to try to build their own. Because of the clear disparity between our power supply portfolio and vision of the future and Central’s vision of the future, Central agreed that it would be best if two separate organizations were formed.

Building new generation looked like a great opportunity for two reasons. First, it brings power to Montana that is owned and controlled by Montanans. Secondly, it brings power to Montana that we believe will have a cleaner environmental footprint based on the equipment that SME is putting in place. Highwood Station will be using the best available control technology. Mr. Gregori stated that he is having discussions with Big Horn Electric. However, their contract with Bonneville goes out to the year 2017. One of the things that folks are learning is that if you are going to get ahead of the power supply situation, you are not going to do it in a matter of a couple of years. You normally need to be four or five years out ahead of that process with the contract. Mr. Gregori stated that SME has power that it buys from the Western Area Power Administration, including wind, or some environmentally preferred product.

On July 1st of this year, SME will lose its first block of power from the Bonneville Power Administration. At that point, SME will begin meeting power supply needs with purchases from other entities. Mr. Gregori described slides that showed by 2011 the Bonneville piece drops off. The area below the line showed the amount that we are deficit from a traditional supply standpoint. He explained that it doesn’t mean the lights are going to go out. It just means that is what our requirement is to replace the mix that we have today which is Bonneville, Western and environmentally preferred products. He stated that this is just for the co-op side. If the City of Great Falls was included in the slide, there would be another small bar on the graph where we are buying power today from PPL Montana. Hopefully, by 2013 that will be replaced by power coming out of Highwood Station.

Another issue that has been discussed quite a bit is what the peak requirements are. Mr. Gregori pointed out that every month, with the exception of May, October and November, the demand has been appreciatively greater in 2007 than it was in 2006. From 2004-2005 the load increased 12%. From 2005-2006 the load increased 14%, and from 2006-2007 the load increased 7% in the peak demand requirement. He showed the requirements less losses and reserves. He described it as kind of like the water system for the City of Great Falls. If we put a meter at the main distribution point and put a meter on all of the houses, when you total up what they put in the system and what they metered, there is a difference. That difference is called losses. Mr. Gregori also discussed an issue called reserves. Reserves means you need to contribute to a pool of generation resources so that if a generator were to break the system remains stable. Electricity is produced and consumed instantaneously. He explained if you took those numbers and included losses and reserves, the peak demand is more like 170 megawatts. He stated when Highwood Station is sized, they have to take into account the individual consumer needs, plus reserves and losses. When you build generation that you own yourself, you can either go buy your reserves and losses or you can generate your reserves if you contribute to the pool. With the market prices of electricity as they are today and with the forecasted price of generation, particularly base load generation, it is a wise business decision to own your own reserves and losses. He compared it to renting the spare tire on your car versus owning the spare tire on your car.

Mr. Gregori showed the average Beartooth customer that uses 1,178 kilowatt hours on an annual basis, and compared the price they are paying for electricity from SME versus what a customer paid NorthWestern Energy. The SME rate paid by Beartooth was approximately 47 percent less than what a customer pays at NorthWestern Energy. The City of Great Falls’ customers are paying at rate of $48-$49 dollars. That is appreciably less than NorthWestern Energy. Those figures are for residential customers and they are similar for most small commercial and large commercial. He stated that there would be some discrepancy on industrial rates depending on the contract.

Mr. Gregori stated that there has been confusion about what is firming power or back-up power and what is actually called regulating and frequency response power. While HGS is being discussed, was well as other resources and the needs of the region, two things are happening. First, we are seeing reserves shrink. The Trojen Nuclear Plant was shut down in the State of Washington, as well as the lignite-fired plant in Washington. Some of the facilities are being shut down because of the cost to refurbish those 30 year old plants to deal with pollutants. They are not like the Highwood Generating Station plant where we will meet or exceed all the federal standards. The reserves are going down, but the load continues to grow. The estimates from the Department of Energy from 2005-2030 show that we will see a 40% load growth. At the rate we are going, by the year 2015 we won’t have adequate reserves. Mr. Gregori explained a slide that compared the prices of electricity. There were instances shown in the slide that non-firm on-peak power was actually more expensive than firm on-peak power. He explained the reason for that is that we are starting to run short on some of those reserves. More importantly, non-firm, off-peak power that is sold at 2:00 a.m. when most businesses are shut down and demand is the least, there are actually times when non-firm, off-peak power is costing more than firm, on-peak power. He stated that was because of the diminishing reserve situation.

Mr. Gregori went on to explain that there is always a point when you reach this need of regulation and frequency response. This needs to be taken into consideration, particularly with wind generation, because you don’t know when wind is going to be there and when it is not. He stated that we do know that it will be there about 35% of the time. But, we need a supplemental source of power to meet that need when wind isn’t there. Because of the shrinking reserves, spot purchases are $80/megawatt hour, which means $.08 cents a kilowatt hour.

In 2006 the average price of natural gas was about $5.70. Right now it is about $8.00. He stated that Great Falls is in pretty good shape because the Great Falls Gas Company has some good contracts, so the prices are a little lower in certain instances. The rates depend on whether they went out and got contracts four to five years out.

We are seeing that our need remains in place, and our load continues to grow. We see the alternative, but the alternatives are expensive. In terms of HGS, Mr. Gregori stated that SME continues to make progress. It has the site, under option; the air quality permit is in final form. There are issues with particulate matter 2.5 that SME continues to work with the Board of Environmental Review and the Department of Environmental Quality (DEQ); it has the Record of Decision on the Environmental Impact Statement; they have the solid waste disposal license from Montana DEQ that they got on a voluntary basis; the water agreement is in place; and they are looking forward to working with the City of Great Falls to receive raw water, wastewater and potable water, and becoming a significant source of revenue for the City; the large generator interconnection agreement is in place; the network transmission agreement is in place; and SME continues to work on operating and spinning reserves. He added that SME has State Land Board approval for easements across the Missouri River, the Project and Labor Agreement is in place, and SME has had favorable sessions with regard to zoning. Mr. Gregori quoted County Commissioner Olson stating that he has read all the documents and he is still convinced that the best place to build a power plant in Montana is east of Great Falls. That is where the Montana Power Company decided to build a plant in the 1980’s. Mr. Gregori stated that SME understands that there is a lot of controversy, it respects the views of the opponents and will listen, but SME needs to move forward.

Mr. Gregori stated that SME continues to look at integrated gasification combined cycle. He reminded everyone that IGCC stands for Integrated Gasification Combined Cycle, not Integrated Gasification Carbon Capture. He stated that he hasn’t seen much movement on IGCC. There are still two IGCC facilities operating in the United States. Both were heavily funded by monies from the Department of Energy. The Department of Energy has abandoned its plans to build an IGCC facility. HGS is going to be funded primarily on the strength of the members’ contracts. Wind is a good resource and SME continues to move forward with its 6 megawatts of wind. He said he had lengthy discussions with folks interested in perhaps installing additional wind in conjunction with this facility. Mr. Gregori agreed that wind is an important resource, but it does have some limitations. Transmission is another big issue. With all of those things in mind - pricing, technology, transmission, the needs of the customers, SME still remains convinced that HGS is a viable option.

Mr. Gregori stated that in addition to solid waste disposal, they have activated carbon injection to deal with mercury. He said they have the maximum available control technology on mercury. A technical work group was put together a year ago to take a look at carbon capture and sequestration. SME continues to work with Alstom, the boiler manufacturer, as they develop the technology of the Wisconsin facility. He stated that if SME can put it in economically and technically, SME intends to move forward with carbon capture and sequestration. He stated that HGS will be in close proximity to one of the best locations in the U.S. to store and sequester carbon on a permanent basis. The geologic dome by Shelby is an interesting geological formation because there is actually naturally occurring CO2 that has been stored at that facility for many hundreds of years. The preliminary investigation shows that there is adequate storage capacity in the Kevin Dome to store the CO2 from HGS for a couple hundred years.

Mr. Gregori stated that SME never represented that the capital price would not change as a function of normal economic prices. What is important, as the economics of the project change, is what has been the commensurate change on benchmarks. Natural gas has double in price from 1997 to 2007. From 2007 to 2008 it already is on track to be up $1.50. He stated that they always have to go back and take a look at what the economics are in comparison to the alternatives to make sure we haven’t erred when we do the economics.

Mr. Gregori provided an example on the board regarding wind power and discussed regulation and frequency response. He said the word “firming” is misused. Regulation and frequency response is explained, roughly every four seconds, the operator of an electric system has to make sure that load is in balance with supply. When you put generation on a transmission system or you buy a contract and you put it on the electric system, one of the things you have to pay as a part of the tariff is regulation and frequency response. This is also what it takes to firm a supply source until the next whole hour. It is not total firming. A debate followed regarding whether wind is available about 35% of the time or not.

Mr. Gregori conclude that the goal is public power that is owned, operated and developed by the member systems. As SME gains more experience with wind diversity, he stated that he believes it will become a bigger dimension of SME’s power supply portfolio.

Chairman Golie asked if there were any questions from the Board members. Hearing none, Chairman Golie asked if there were questions from the public.

Ed McKnight, referred to a slide and Mr. Gregori stating that he needed to replace 250 megawatts that we were losing. Mr. Gregori responded over time, yes. Mr. McKnight stated that the highest peak usage that the slide showed was 170. Mr. Gregori stated 170 in 2007. The plant won’t come on until 2013. There will be six years of load growth. Based on the load growth between now and 2013, Mr. Gregori explained that they were projecting the requirement to be approximately 215-220 megawatts, which allows load growth to carry them out to 2018. Mr. McKnight referred to the environment impact statement. Mr. Gregori stated that load growth, if you look at the load forecast, is more conservative than our load has actually been. Mr. McKnight said that it constantly increases all the time. Mr. Gregori explained that if you take the load growth from 2008 to 2018, they are forecasting roughly a compounded load growth of about 3-3½%. To put that in perspective, he stated that Yellowstone Valley is at 4½ - 5½% load growth compounded for 30 years. He stated that they are seeing considerable growth on the system. Mr. McKnight asked if he took economic recession into account. Mr. Gregori answered affirmatively.

Stuart Lewin, 615 3rd Avenue North, stated that he is confused about the City’s relationship with SME. He asked if the City is represented and has a vote on the SME Board and, if so, what the vote means. He is interested in knowing if there are any written agreements between the City and SME. He said he understands there is a contract for purchases, but he is interested in knowing about the City being a partner. He wants to know what the relationship is. Mr. Gregori responded that his understanding of the relationship is between SME and the City of Great Falls. He explained that SME is an electric cooperative formed under Montana law governing the formation of electric cooperatives, which means that the folks that purchase from SME must be a member of SME. The City is a member of SME and, as a member, it has a vote on SME’s Board of Directors. He stated that SME has a contractual relationship that underscores that relationship as being a member of a cooperative and they have a contract to sell power to the City of Great Falls, or Electric City Power in this instance, on the basis of what it costs to secure that power. Any decisions made with regard to cost associated with that contractual relationship are voted on by the Board of Directors. The word “partner” probably stemmed from the way it was articulated during the time when the financial relationship looked like SME was going to have a cooperative portion of the plant funded by the RUS and the City of Great Falls was going to seek its own financing. Because the RUS, through the direction of Congress, is not going to be providing any financial backing for the project, what we now have is a single financing entity. SME will simply use the co-ops’ load requirements as part of the justification for any financing SME receives. They have to demonstrate to the bond rating agencies whether SME is credit worthy or not. That will be how they determine the interest, cost of money, and the project will move forward. Mr. Lewin asked if the City was a part of that financing group. Mr. Gregori answered that SME’s load and contracts are considered as part of the total requirement. Mr. Lewin again asked whether the City was a member of that group. Mr. Gregori answered that ECP is a member of SME. SME is the entity securing the financing.

Richard Liebert, 289 Boston Coulee Road, stated that in correspondence he received a few months ago he was told that ECP did not need a development agreement for the City. He checked City Resolution No. 9537 directing the City Manager to execute a development agreement with SME. That was 852 days ago. Mr. Liebert stated that he was curious when SME will complete the development agreement with the City of Great Falls. Mr. Liebert stated that there is also an Ordinance that states the City has gone global on energy and agreed to comply with the International Energy Conservation Code. Mr. Liebert said he will assume ECP customers in the City would meet that compliance with that Ordinance. Mr. Gregori answered when this was first started, the co-ops were going to get financing from the RUS. The City, because it didn’t qualify as a borrower from the RUS, was going to try to sell its own bonds and secure its own financing. The development agreement was necessary to bring those two pieces of financing together to protect the rights of the two groups and define all those rights and where the money was going to come from. When the RUS notified SME that they were not going to provide financing because Congress was not going to fund any coal fired generation, the need for the development agreement went away. Mr. Gregori explained that, because there was no longer a restriction on whether SME could use monies from a certain entity to cover the plant, it was now a single financial instrument. By virtue of the fact that you are a member of SME and SME is the entity getting the financing, not ECP, the need for the development agreement is no longer necessary. Mr. Liebert said that he believes the new City Manager is ill served because the last City Manager did not accomplish the task as outlined in the Resolution. Further, Mr. Liebert stated that the City Commission did not hold him accountable to get it done. Mr. Liebert asked again when it would be done. Mr. Gregori answered that it was two completely different things. The development agreement isn’t necessary because there is no over-lapping between financing coming from two sources. It is a single source of financing that is secured by SME. SME is an entity of its own.

Neil Taylor, 3417 4th Avenue South, stated that Mr. Gregori mentioned the inter-connect and that he has an agreement with NorthWestern Energy. He asked how that dovetails with the matter before the Federal Energy Regulatory Commission (FERC) that is going on with Montgomery Energy (ME) in terms of who is where on the transmission pecking order. He stated that there is only 250 megawatts in that facility, and Montgomery Energy is talking about getting 250 megawatts. How is all that going to fit when ME is planning on coming on line in the next year and a half. Mr. Gregori said FERC is the entity that deals with how entities come onto transmission grids. They have a policy that is out on the internet called the Large Generator Inter-Connection Policy. It is based on a first come, first serve basis. He said SME is ahead of ME in the queue, which is the lineup of when you put your request in, when you paid your monies to do all the studies, and when you signed your large generator inter-connection agreement. SME’s agreement was signed, the studies were completed, and the LGIA was in place ahead of ME’s. If SME was not able to build its facility within the constraints set up by FERC, FERC allows you to extend your position. He explained that when Montana First Megawatts put in for their FERC position, they let it sit for seven years before they fell out off the queue. SME is not even up to its first deadline yet. So, SME gets the chance to work its project out completely before ME moves ahead. Even if ME were to start construction tomorrow and finish construction, SME’s transmission right remains. FERC Orders 888 and 889, which was the electric restructuring of the transmission system, put these policies in place. There have been subsequent requirements with FERC Orders. This has gone through litigation and been upheld. Mr. Gregori stated that SME litigated in ME’s position when Montana First Megawatts was first in the queue. After they pulled all the equipment away from the site and no activity was occurring, SME said they shouldn’t be able to keep their spot. FERC disagreed stating that until they withdrew it, SME would have to wait. They withdrew it when they sold the site to ME. SME moved up and now enjoys the same position that Montana First Megawatts had. SME is first in line. SME has the right to the capacity and will move forward under those premises. Mr. Taylor asked what happens when they finish their construction in a year and a half, then how can they come on line. Mr. Gregori answered they have what is referred to as interruptible non-firm transmission rights. This means they get to operate and, unless someone comes along with a senior right for firm capacity, they get to operate as long as they want. Traditionally, for example, when a wind generator hooks onto the transmission line, you normally see a conditional firm agreement which is a quasi-firm situation where they say so long as no one else is using that capacity and our generator is working, we want firm capacity at any time our generator is working. Then non-firm can come in behind us, so it is kind of a step in between. Most load control area service providers treat wind as non-firm load.

Cheryl Reichert, 51 Prospect Drive, asked about potential liability for the City. She asked Mr. Gregori to comment on what the potential liability is on the taxing authority of the City. Mr. Gregori answered that the entity borrowing the money is SME. The underpinning for SME to borrow that money is the contractual relationship with customers. The liability stops at SME. At this point, all discussions with the rating agencies have been that the entity borrowing the money is SME. They are saying those contracts are firm for the customers to buy the power, and they say it comes on at those particular prices. The revenue stream is from the customers paying their bills to SME, and SME then paying its bills to the bank, and that is the full transaction. The City has not pledged its taxing authority to those bonds. Ms. Reichert asked if it was correct that the contracts do not go out for 40 years at Yellowstone Valley. Mr. Gregori answered that SME has five cooperative members and the City of Great Falls. Four of the cooperative members have contracts to 2048, one co-op has a contract to 2030, and the City of Great Falls has a contract to 2048. When SME was dealing with the RUS, it said that it wanted the contracts with each of the member systems to coincide with the term of financing that it was going to put in place for the project. Now that we are looking at bond financing, what they are saying is if you are going to fully subscribe that plant in the first five years of its operation, and between 2013-2018 you have completely used its capacity, the rating agents are saying that is good enough for us. We don’t need it to go out farther because you are going to be buying other contracts. The rating agencies are also saying if this makes enough sense for us to give you an investment grade rating so you can go out and borrow the money, if Yellowstone Valley wants to leave in four or five years, that is actually better for us because we know you are going to make more money selling that power out on the open market. Ms. Reichert asked if the City is wed to SME and ECP until 2048 regardless of whether the full plant is operational. Mr. Gregori answered that the City is wed contractually to SME until 2048 if SME moves forward with the project for financing purposes. The Board has made it very clear, if HGS doesn’t move forward, it will have to rethink this. Mr. Gregori stated that SME has contracts in place until 2011. SME has already bought power from the Western Area Power Administration up to 2020. ECP has a contract with SME until 2048. Four members have contracts to 2048, and one member has a contract to 2030. Mr. Gregori stated that they will deal with how all that comes together as a power supply mix as they know more information and move forward. To do anything otherwise would be speculation.

Mary Jolley, asked Mr. Gregori if he would make his slide presentation available to the City Clerk. Mr. Gregori responded if she had particular slides she wanted from him to call him. She asked for the whole presentation. Mr. Gregori responded that some of the information is proprietary. He informed her that he would need to know which slides she was requesting and then he would make those available for her to view at his office.

Richard Ecke, asked Mr. Gregori if he, or any representative, has had any discussions with Invenergy. Mr. Gregori responded affirmatively. Invenergy approached SME with the expansion at the Judith Gap area. He stated that much of the information he showed in the slides was based on discussions with Invenergy, and stated that is why he was comfortable saying that the prices of wind were going to be far north of $35 a megawatt hour. Mr. Gregori stated that SME is bound by a non-disclosure agreement with them. Wind is not the most economic resource that SME has evaluated. It continues to be a viable resource that SME wants to deal with. Fifteen percent of Montana’s portfolio needs to be renewable by 2015.

Charles Bocock, 51 Prospect Drive, stated that the City paid for the R.W. Beck study in January 2007 indicating the present cost of the plant at that time. Mr. Bocock asked what Mr. Gregori saw the plant costing by 2013 – the final bill. Mr. Gregori responded that, if everything was in place, he estimated the cost of the project to be in the $790-$800 million dollar range. He stated that he can’t tell Mr. Bocock what is going to happen to the prices a year from now, all he can say is at this time those numbers remain the same. Mr. Gregori explained that the project has gone from $485 - $645 million because the costs have gone crazy. Mr. Bocock asked how would they know how much to borrow. Mr. Gregori answered that all they can say is their indicative prices from the major venders would total to this requirement. Until and at which time the final contract is executed to fix that price, all we can use now are these indicative prices. Mr. Gregori compared it to buying a home. You don’t know all the exact final costs until closing.

Unidentified Speaker, stated that in the past year a number of coal fired generators have been canceled. He asked Mr. Gregori what the climate is for SME to finance this project. Mr. Gregori responded that the carbon capture technical work group and a couple of entities involved in writing the letter to Wall Street are saying that they want every entity considering coal to address what they plan to do about carbon moving into the future. They said that HGS is exactly what they want people to do. Look at their opportunities for capture and sequestration. Look at their economic opportunities if they were going to sell the CO2 to some other industrial enterprise.

I.   UNFINISHED BUSINESS

II.  NEW BUSINESS

Accept Board Meeting Minutes of March 3, 2008. Bob Pancich moved, seconded by Bill Ryan, to accept the Board minutes from the March 3rd meeting. The minutes were unanimously approved by the Board.

III. BOARD MEMBER REPORTS

IV. COMMUNICATIONS

Public Comment.

Neil Taylor, 3417 4th Avenue South, stated that when he was browsing the internet and looked at the MAFB CTL project, he ran across a page that said they are expecting coal to cost $30/ton delivered. Mr. Gregori estimated the cost to be $12, and made a statement that once it reached $18 he would look at mining locally.

Mary Jolley, 1910 2nd Avenue North, commented that public power is developed, owned and operated for the benefit of all the members and decisions are made at the local level. As City Commissioners, she stated that they rarely get any guidance from this Board. They have relied on Mr. Gregori for years to tell them things that constantly change. Ms. Jolley said that Mr. Gregori told them for years that 75% of the financing was secure. The City started out having an equity interest based on the load of 20 megawatts – that was 17.65 %. The City Commission then decided to approve trying to own 25%. That is when there was going to be a development agreement. Ms. Jolley stated that this is like the Roach Motel, apparently we can get in, but we can’t get out. We are not in charge of our energy. Public power means that you start with the people and that part was skipped. Any reference to the right to vote was repealed one week before the election in November of 2005. Ms. Jolley said the City Commissioners get Library Board, Planning Board, and Parking Garage meeting minutes, but they don’t get any written documents from ECP, no reports from this Board at the City Commission meetings, and ECP has members that have been here fewer times than she has over the past couple of years. She doesn’t think the Board is up to the task. As a City Commissioner elected by the people, she stated that her job is to watch out for the best interests of the residents of Great Falls. Millions of dollars have been spent on this. It is projected in the 2008 budget to have a loss for the year of $1.5 million. The costs associated with this are not all inclusive. Many of the costs are left out. Ms. Jolley stated that it is very disappointing to her that the City has continued down this path.

Paul Stevens, 820 3rd Avenue North, commented that Mr. Gregori stated that the load growth increased by 40%. He stated that there is a big economic gap there and believes the coal figures will be $10 - $30 per ton. Mr. Stevens stated that, instead of building a 100 megawatt wind farm if you need 100 megawatts, you need to build a 300 megawatt wind farm. Then you get the 35% running all the time. There will be surplus at times, and you will buy firming power at other times. Actually, the firming power only adds a few dollars per megawatt to the price. That is what Judith Gap does. Mr. Stevens stated that Great Falls has the best wind environment in the country. Mr. Stevens stated that there will be absolutely no use for the Highwood Station by the time it is built. There will be wind farms between here and Canada, more in Judith Gap, and one is being planned outside of Great Falls. Wherever there are major transmission lines there will be wind farms along them eventually. Mr. Stevens stated that coal will be too costly by the time Highwood Generating Station is built. He agrees with public power after deregulation, but he does not agree with this technology and associated costs.

Aart Dolman, 3016 Central Avenue, asked what the contractual agreement is with SME. Mr. Dolman also asked if meetings took place about Montgomery Energy’s offer. He said he now discovered that ECP is a separate entity. Ms. Balzarini’s letter turned down negotiations with Montgomery Energy. He asked if this Board met and gave direction to Ms. Balzarini. Mr. Dolman stated that he believed the Chairman of the Board or the Mayor should have signed the letter. Bill Ryan reminded Mr. Dolman that ECP has an All Requirements Contract with SME. Mr. Dolman stated that Montana has a terrific reputation, but people are becoming reluctant to come to this community.

Ron Gessaman, 1006 36th Avenue N.E., commented that ECP has not followed its by-laws by not providing minutes of the previous meeting. Bill Ryan joined in that complaint. Mr. Gessaman stated that Mr. Gregori did not mention carbon capture or technology. He stated that coal prices have gone up faster in the past five years than natural gas has in 10 years. Mr. Gessaman commented that Mr. Gregori said the cost of electricity from Beartooth was around $58-$59 megawatt. Mr. Ryan responded that the difference in the slide was because Beartooth owns the distribution. Mr. Gessaman discussed Ordinance 2937 and Resolution 9537. He stated that the City Commission has to rescind the Ordinance.

Kathleen Gessaman, 1006 36th Avenue N.E., commented that Mr. Gregori’s presentation was nice from SME’s point of view. However, Great Falls needs more information. Ms. Gessaman asked why should we pollute our city. Ms. Gessaman stated that she wants to see a contract that states the City of Great Falls is a member of SME.

Stuart Lewin, 615 3rd Avenue North, commented that he opposes HGS. He stated that this Board is neglecting the citizens of Great Falls. Mr. Lewin asked who on this Board read it and when did the City Commission approve the contract referred to by Mr. Gregori to buy power from SME exclusively until 2048. Chairman Golie and Mr. Ryan responded affirmatively. Ms. Balzarini answered that the City Commission approved the contract on October 2, 2007. Mr. Lewin requested a copy of the Wholesale Power Contract and was informed it was available on-line.

Charles Bocock, 51 Prospect Drive, commented that Mr. Gregori said the plant will cost $790 million dollars and since ECP is stuck until 2048, how much will the compounded interest rate cost. Ms. Balzarini responded as a general rule of thumb, principal and interest payments roughly equate to two times the amount of the original borrowing. Mr. Bocock opined that it will cost $1.6 billion dollars. He stated his concerns about the payment requirements for $1.6 billion over 30 years, and does not want to see the pilot program customers come back and ask for help to pay the bill.

Cheryl Reichert, 51 Prospect Drive, stated that the Board of Environmental Review will be discussing the PM2.5 on April 21-22nd. She said that PM2.5 causes lung disease and will have adverse impacts on the most vulnerable. An analogy is marbles in a strainer with flour. Ms. Reichert said what Mr. Gregori talked about would only filter the marbles. She does not want to be collateral damage in this process.

Ed McKnight, 906 3rd Avenue North, commented that in the western U.S. they are constructing wind turbines fast and have run out of people to help build them. Mr. McKnight stated that Tim Gregori is not competent.  *

Aart Dolman, 3016 Central Avenue, asked if ECP was the member of the coop and was responded to affirmatively. Mr. Dolman asked if they have a constitution. Bill Ryan responded that they have by-laws governed by federal and state rules.

Chairman Golie advised that Dawn Willey will be the chair at the meeting on May 5, 2008.

ADJOURN: Bob Pancich moved, seconded by Bill Ryan to adjourn the meeting. Chairman George Golie adjourned the meeting at 7:40 p.m. The next meeting is set for May 5, 2008, at 5:30 p.m. in the Gibson Room of the Great Falls Civic Center.

(*Minutes corrected June 9, 2008.)