Water sale hearing to test limits of PSC authority - The Missoulian
HELENA - As the state Public Service Commission prepares to decide whether to approve the sale of Mountain Water Co., the private company that provides drinking water to Missoula has what might seem a sharp-elbowed comeback: The PSC has no authority to decide.
"The ownership of Mountain Water Co. is not at issue in this proceeding," the company's co-CEO, John Kappes, told the PSC earlier this month. "Mountain Water is proposing no action, of any kind, that is the subject of (PSC) jurisdiction."
The five-member PSC, which regulates utilities in Montana, sees things differently, and says it has the power to approve or reject the proposed sale of Mountain Water's parent to the global investment firm, the Carlyle Group.
Still, the sharp divide between the company and the PSC on this issue begs the question: Just what can the commission decide, and what power does it have over the sale of Mountain Water?
The commission voted 5-0 in June that it has jurisdiction over the sale, plans at least a two-day hearing on the issue starting Monday in Missoula and has gathered hundreds of pages of documents and evidence in preparation for its final decision, expected by December or January.
Those who believe the PSC has power over the sale say it can approve it, reject the sale or approve it "with conditions," which may be the most likely outcome.
"We think the PSC's authority over Mountain Water extends far enough for the commission to provide some protection for Mountain Water's assets, and that's all we want to do," says Mary Wright, an attorney for the Montana Consumer Counsel, a state agency that represents consumer interests in cases before the PSC.
Wright and others say the PSC's authority over the sale or transfer of private utility assets - although not granted expressly in state law - is "implied" by its authority to protect utility consumers.
A "change of control" of ownership can affect customers, so the PSC says it has the power to examine and rule on the change.
The PSC has ruled on many utility mergers, sales and other transactions over the past dozen years, but has rejected only one, in 2007: the proposed sale of NorthWestern Energy, the state's largest electric-and-gas utility, to Australian investment conglomerate Babcock and Brown.
Commissioners feared the new owners offered more financial threats than benefits to NorthWestern, and they were right: Babcock and Brown collapsed in the financial meltdown of 2008 and was liquidated in 2009.
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While the PSC has asserted its authority over recent utility sales in Montana, that power hasn't been tested in court.
This legal vacuum has left what one attorney called an "elaborate game of chicken" whenever the commission examines a sale: While companies often insist the PSC has no clear authority, they generally won't challenge it unless the PSC does something they can't live with.
In the Mountain Water case, two issues have or had the most potential to upset this balance.
The first is whether the PSC would somehow use the sale to enable the city of Missoula to buy Mountain Water - as the city has long desired to do.
That issue has basically been resolved, as Carlyle and the city of Missoula have reached an agreement that gives the city a chance to buy the water system in the future from Carlyle - in exchange for the city's support of Carlyle's proposal to buy Park Water Co. and Mountain Water Co.
The second is "ring-fencing" requirements, meant to prevent the assets of Mountain Water from being used to finance non-utility ventures elsewhere within the Carlyle Group. The Montana Consumer Counsel has proposed a long list of these steps for the PSC to consider.
John Alke, a Helena attorney representing Mountain Water, says the company believes the PSC has no authority to impose such conditions - but if they're reasonable, the company probably won't object.
As far as Mountain Water is concerned, the only legitimate power of the PSC is to determine whether the sale of Mountain Water's parent, Park Water Co., to the Carlyle Group would affect the service and rates for Missoula water customers.
The PSC will still regulate Mountain Water, regardless of its ownership, and therefore the sale should have no effect on customers, he argues.
25 Sep, 2011--
Source: http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNEQp0rZPFnN1H6QmQ6htjJHUOmPtg&url=http://missoulian.com/news/local/article_ff42f510-e739-11e0-997c-001cc4c002e0.html
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