- Associated Press - Friday, January 29, 2016

HELENA, Mont. (AP) - Montana utility regulators agreed Friday to sue the new owner of Missoula’s water system to impose “swift and severe” punishment after the sale went through without state approval earlier this month.

The Carlyle Group and Canada-based Algonquin Power & Utilities Corp. announced Jan. 11 the completion of the $327 million sale of the parent company of Mountain Water Co. in Missoula and two water companies in California to Algonquin’s U.S. subsidiary, Liberty Utilities.

The deal went through after approval by California regulators but while a review was pending before the Montana Public Service Commission. The Montana commission’s review had been suspended by a judge overseeing an eminent domain case in which the city of Missoula is seeking to take over Mountain Water.

Carlyle and Algonquin made a “business decision” to move ahead with the sale without Montana’s approval because of the court delay, Liberty Utilities attorneys said in a document field with the PSC. There is no state law giving the PSC authority over company sales and transfers, and the sale of the parent company’s stock does not affect Mountain Water’s assets, they said.

In response, the PSC voted unanimously to seek a judge’s order fining Mountain Water between $100 and $1,000 a day. Commissioners also will explore with the attorney general’s office whether the sale can be nullified.

“The conduct of the Carlyle Group and Liberty Utilities in this transaction represents a direct attack on the authority of this commission,” PSC Chairman Brad Johnson said. “I hope the response will be as swift and severe as the law allows it to be.”

Commissioners conceded that their jurisdiction over utility company sales is only implied, and not expressly authorized by law, but said they have traditionally reviewed such sales in the past. That includes the 2011 sale of Mountain Water to the Carlyle Group.

Commissioner Bob Lake said the commission should not let this unauthorized sale set a precedent of companies “thumbing their noses at the commission and walking out the door.”

This will be a test case for a court to rule that the commission has explicit authority over sales and transfers, Commissioner Travis Kavulla said.

Liberty Utilities president Greg Sorensen said in a statement that he was surprised and disappointed by the PSC’s actions. The company was voluntarily participating with the PSC until the city of Missoula inserted itself into the process, he said.

Mountain Water president John Kappes added that his company has purchased other water systems in the past without PSC review and without sanctions.

“This decision is not consistent with the law, and it’s not consistent with the past,” Kappes said.

The amount of the fine and conditions of its termination would be decided in court, PSC spokesman Eric Sell said. There was no immediate timeline set for filing the lawsuit, though Johnson asked his staff to send a message to the attorney general’s office that he wants them to respond as quickly as possible.

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