KERR DAM A DONE DEAL

The acquisition of Kerr Dam by the Confederated Salish Kootenai Tribes is in its final stages of ownership transition from Northwestern Energy after decades of plans, negotiations, and preparations. The acquisition is also known as the Kerr Project.

Energy Keepers, Inc. (EKI) – a corporation formed by the CSKT in September 2012, will oversee day-to-day operations and manage the employees, power creation through three-unit hydroelectric turbines, and sell the energy on the open commodities market.

The CSKT Tribal Council will be the “Shareholder’s Representative for all purposes regarding the corporation,” according to a corporate document.

The Tribes will formally own the Kerr Dam outright, along with the corporate EKI board of directors that represents the Tribes’ market interests.

The CSKT will be the first Indian tribes in the United States to own and operate a major hydropower facility. The CSKT obtained exclusive rights to the Kerr Project in 2015.

The exclusive rights are part of agreement provisions in 1985 agreement with Federal Energy Regulatory Commission (FERC) license.

The license is the sole jurisdiction of FERC, and will preempt any state regulation. The dam was completed in 1938 by the Montana Power Company (MPC), and held the license until 1985. That year, CSKT and MPC were granted a joint license by FERC. PPL Montana and Northwestern Energy (NWE) owned and operated the Kerr Project succeeding MPC and have overseen operation since it’s construction.

Travis Togo, the Director of Power Management of EKI, said that although the Tribes will be the new owners, the Kerr Dam will operate and function as it has for decades.

“We will operate under the same licenses and regulations as the past owners have done before,” Togo said. The rules and regulations will remain the same under the FERC agreement in 1985.

Togo spoke with the Lake County Leader during a tour of Kerr Dam to offer open communication, discuss the future of the Kerr Project and explain the logistics of such a large enterprise. “It’s a complicated market.”

According to Togo, Kerr Dam – through ownership of the Tribes – will operate under two specific tenets: Respecting Flathead Lake as a “natural resource,” and selling the dam's generated power in the wholesale commercial markets, making the distinction between retail markets.

“It’s a large marketplace,” he said. “Electricity is a commodity.”

Commodities can be traded on markets and priced by supply and demand.

“The cost of the energy is the cost of the fuel used to produce it,” he said.

Since the Kerr Dam operates and creates power with high voltage generating processes, the electricity can travel long distances before being consumed, Togo said. Kerr Dam is part of a large network of interconnected networks able to deliver power across the western United States.

Along with the Kerr Dam, other operations produce power via wind, solar, and thermal, natural gas units, coal, and other major sources similar to hydroelectric power.

“There are a lot of different types of [power] generation, and a lot of different consumers,” he said.

One distinction that can be made regarding the Kerr Dam is the marketplace.

The CSKT and the Kerr Dam will be in the wholesale business – meaning selling power on a large scale both locally and, potentially outside of the state of Montana.

“Electricity produced here might not be immediately consumed here in the [Mission] Valley,” he said. “Some of our power will be consumed here in Montana…but the average consumer will receive power through utilities and municipalities. “We can sell electricity to local utilities, municipalities, and co-ops – and they in turn can sell [power] to their residential customers.”

Energy Keepers is not in the retail market.

“We’re in a much larger wholesale market,” he said.

Transmitting power locally, such as Mission Valley Power, is one aspect of Kerr Dam’s future transactions, as it has been in past years.

One such local utility customer that purchases wholesale power from Kerr Dam is Mission Valley Power, which in turn is sold to consumers. 19 percent of MVP’s power is purchases wholesale from Kerr Dam, with the remaining 80 percent wholesale power purchases from Bonneville Power Administration. The remaining 1 percent is purchased from a small hydropower supply on the Flathead Indian Reservation.

Concerning Mission Valley Power customers in the retail market, Jean Matt, General Manager of MVP, spoke of the question of rate changes.

“There will be no rate adjustments having to do with the Confederated Salish Kootenai Tribes owning the Kerr Dam,” he said. “But [MVP] expects an increase in rate adjustments in our cost from wholesale power purchases from Bonneville Power Administration.”

Matt also discussed the distinction between the ownership of the Kerr Dam by the CKST and the ownership of MVP.

“Mission Valley Power is a federally operated electric utility which is operated and maintained by the [CSKT],” he said. “Operation and management is granted under the authority of public law 93-638, the Indian Self-Determination and Education Assistance Act of 1975.”

Kerr Dam has the ability to transmit electricity long distances to industrial entities – large factories in other states such as oil refineries, but Togo said EKI is focused on local sales within the state.

“It costs a lot of money to wield the electricity around,” he said. “We’re trying to find as many natural customers as we can. Those are people that have the ability to use the power right here at home.”

Kerr Dam has the reach and wherewithal to transmit power across the western U.S., but Togo said EKI has been successful finding local retail markets.

“We haven’t sold any power outside of Montana,” he said. “We’ve been successful at finding customers here…so far, to an extent.”

Togo did not to specify any plans for selling power outside of Montana.

The plan, Togo said, is to “find a home for the electricity here – locally,” but Togo and EKI, and by extension CKST, could find it financially viable and advantageous to transmit power off the Reservation, Lake County, and out of Montana.

“If there is some commercial advantage [to transmitting power long distances], we can do that,” he said.

However, Togo said typically EKI and the CKST would seek local markets first and foremost. “We want to avoid having to pay to wield the power around the West.”

Drought conditions are still under consideration for the operators of the Kerr Dam and, as Togo stated before, will follow the same FERC regulations as before. Togo said nothing will change regarding keeping the Flathead Lake at full pool, “drawing down the lake” during the winter, and maintaining and managing stream flows that affect the Flathead Lake.

Financial interests in the Kerr Dam Togo declined to name include “Active vibrant hedge funds.”

There are a few notable changes to operations, however, that will be implemented. Local operators will be on site 24/7, and EKI has installed fiber optic lines throughout the dam and at the base of the dam to measure data in real time – measurements such as temperature, stream flow, and lake levels.

Togo said that any pubic skepticism of the CSKT owning and operating the Kerr Dam may result in a “fear of change,” and “not knowing the facts” about the Tribes’ ability to operate such a large facility under historic conditions.

However, Togo said he hopes residents in the Flathead Indian Reservation and Lake County will see the benefits of the Kerr Dam being “locally controlled.” Moreover, he said another benefit would be that EKI and its 26 local employees would be on site and “more available.” EKI, he said, is aware of inherent criticism and hesitation to the acquisition. “The locals have our ear.”