Folks, certainly not all corporations and financial institutions are guilty of what is contained in the following CBS article. But there is also another culprit that glaringly deserves to be highlighted as a co-conspirator in this destruction of common good. That being the Montana legislature and political hierarchy in power at the time.
This is yet another classic example of the plundering and pillaging brand of Republicanism in action. Forget jobs, who cares about destroying the economy, neglect the community and basic human need for affordable power–all hail and only hail greed.
This savaging of humanity all took place pre-Brian Schweitzer’s winning the governorship and graphically demonstrates the need for the Democratic Party to be a 50-state entity AND one that represents common interests, not Wall Street contributors and corporate cannibals.
Who Killed Montana Power?
Aug. 10, 2003
(CBS) For nearly 90 years, the Montana Power Company exemplified the very best of American capitalism. It provided cheap, reliable electricity for the people of Montana, excellent benefits for thousands of employees and generous, reliable dividends for its stockholders.
Everyone was happy, except for the corporate officers and their Wall Street investment banking firm who decided there was more money to be made in the more glamourous and profitable world of telecommunications.
The result exemplified the worst of American capitalism.
When 60 Minutes first reported this story last February, the cheap electricity, the good jobs and the life savings of a lot of people were gone, along with the name Montana Power.
Its demise may not be the biggest scandal of our time, but to its stockholders, it shows how greed and outright stupidity destroyed one of the oldest and proudest companies in America. Correspondent Steve Kroft reports.
Gary Buchanan is a former Montana legislator who runs an investment firm in Billings. Over the years, he bought and held lots of Montana Power stock for his clients.
What’s more, its customers, which was everyone in Montana, had some of the lowest electricity bills in the country. The rates were regulated by the state, and in exchange, Montana Power received a monopoly.
The only people not satisfied with the arrangement were the executives at Montana Power. In 1997, their lobbyist pushed a bill through the state legislature to deregulate the price of electricity and open up the market to competition. It was supposed to be good for the consumers, who could decide who they were going to buy their power from at the lowest possible prices.
But Frank Morrison, a former Montana Supreme Court justice who now represents the stockholders, believes there was another reason. He says Montana Power officials had already decided to get out of the utility business, and were using deregulation to drive up the price of its assets.
“Part of the plan involved going to the legislature and pushing through a bill right at the end of the session, with no deliberation to deregulate power in Montana,” says Morrison. “They did that, in order to make the generating assets more valuable on the open market. No price limit on selling power in Montana. Therefore we can go out and sell these generators for more money.”
Sure enough, within six months of the bill’s passage, the company began selling off its generating assets.
First it sold the company’s hydroelectric dams, coal mines and power plants to Pennsylvania Power and Light. Next, Montana Power announced it was selling its transmission and distribution system and getting out of the business entirely.
It was going to join the dot.com revolution by transforming itself into a high-tech telecommunications company called Touch America. The decision was made on the advice of its New York investment banker, Goldman Sachs, without consulting the stockholders.
“Everybody was stunned,” says longtime shareholder Marjorie Schmechel. “I mean, the shareholders that I knew were stunned. The employees that I know said that that came completely out of the blue to them.”
Schmechel and her brother Mike now owned a stock called Touch America, which had once been a small but profitable telecommunications subsidiary of Montana Power.
Do they think that most of the stockholders knew that their investment had gone from a sort of stodgy, reliable, safe utility stock to a very, very highly speculative, very risky telecom stock?
“I would say that most of them knew there was some change,” says Mike Schmechel. “But I doubt that most of them knew how drastically different it was.”
The company’s plan was to take the $2.7 billion dollars raided in the sale of Montana Power’s assets, and literally bury the profits in the ground.
The new company, Touch America, was going to lay a 26,000-mile fiber optic network that would carry voice video and data transmission across a dozen western states. It was the brainchild of Montana Power/Touch America CEO Bob Gannon, who was born and bred in Montana.
Why does Morrison thinks that Gannon and Goldman Sachs decided to get out of the energy business and into telecom?
“He was tired of what he thought was a stodgy utility stock. He owned an awful lot of shares. And I think he wanted to be the Bill Gates of Montana,” says Morrison. “I think he wanted to get into a high flier situation where he could go to a $100 a share instead of sit there at $30. With Sachs, Goldman Sachs, it was simply money.”
It didn’t take long before things started to unravel. No sooner had Montana Power sold its dams and power plants, than deregulated electricity prices shot through the roof – and Pennsylvania Power and Light began selling its cheap Montana electricity out of state to the highest bidder.
Electricity prices in Montana doubled, then redoubled, and doubled again – refineries, lumber mills, and the last working copper mine in Butte was forced to suspend operations because they couldn’t afford their electricity bills.
For the rest of the article, go here:
http://www.cbsnews.com/stories/2003/02/06/60minutes/main539719.shtml
