Gazette opinion: Important questions raised but unanswered in hydropower purchase

2014-07-23T00:00:00Z 2014-09-02T16:46:41Z Gazette opinion: Important questions raised but unanswered in hydropower purchase The Billings Gazette
July 23, 2014 12:00 am

Previously, we’ve said that a proposal by NorthWestern Energy to buy hydroelectric dams in Montana from PPL-Montana would seem to be a good deal.

If.

That is, it is a good deal if citizens are truly getting a good deal.

During last week’s continued testimony before the state’s Public Service Commission, more questions were raised by the Montana Consumer Counsel, the independent body created to represent the public’s interest when it comes to regulated utilities.

The hydroelectric purchase would seem to be a good deal if power rates continue to rise because the number of power generation options become more restrictive. And, that’s a real possibility given the Obama administration’s recent crackdown on coal. Nuclear technology is still fairly restrictive. Natural gas, for the moment, is cheap and plentiful. And renewable energy while certainly more prevalent is still a small segment of the energy market.

On the whole, it would appear that NorthWestern’s bet that the cost of reliable energy will continue to put pressure on power prices is a good risk to take, and buying the hydroelectric projects in Montana would seem to be a good deal.

If, on the other hand, power generation remains flat, this nearly $1 billion purchase would saddle NorthWestern ratepayers with higher bills and little to show.

We sympathize with NorthWestern which doesn’t have a crystal ball to read the future.

Adversarial hearing

Last week’s exchange between the Consumer Counsel and NorthWestern was adversarial. Instead of providing deeper answers, CEO Bob Rowe’s answers seemed to antagonize the situation rather than offer clarity. We hope the Public Service Commission, the elected board that ultimately has to balance the public’s need for reliable, affordable energy with the ability of a utility company’s ability to survive and prosper, will make sure it has deeply vetted the answers for the benefit of the ratepayers.

For example, we hope the PSC remembers that whatever the final rise in rates is settled upon, that’s just the beginning for rate-paying families and seniors on fixed incomes. If the rate is 6.5 percent, that’s just the increase to help pay for these dams. That may not cover other Northwestern increases, nor will it necessarily keep the dams in good condition. In all likelihood, NorthWestern will be back before the commission wanting more. So, then it will be more on top of more.

Next, we hope that while the PSC and Montanans don’t forget the failed deregulation of the old Montana Power Company, that the move to reacquire the dams at a healthy market rate from PPL-Montana isn’t the main driver. In other words, we hope the desire to atone for the mistake of the not-too-distant past doesn’t mean the wrong move for ratepayers decades in the future.

We continue to remain concerned about the price of the dams. Book value of the dams seems way out of line with the market value PPL-Montana is asking. Granted, buyers and sellers in a marketplace pay market value, not book value. However, in this case both seem far out of line. We hope the PSC and the Consumer Counsel work hard to ensure this really is a good deal, instead of just a good deal for PPL-Montana.

Rate payers at risk

Finally, no one has seemed to get a straightforward answer to whether NorthWestern would still go through with the hydroelectric purchase if the PSC didn’t give the company the full amount its asking for. Would it still complete the sale if it got less? That’s a fair question and one that should be asked. If this is really a once-in-a-lifetime opportunity, then NorthWestern should be able to put more on the line to do the right thing. If the only way it can achieve the hydroelectric purchase is by only getting every cent it asks for, we have to wonder is it really such a great deal? This new rate increase would seem to assure two things – that NorthWestern cannot lose on this deal and ratepayers will pay more.

But through the rate increase, is NorthWestern really leveraging itself, or is it playing with house money supplied by the rate increases?

Many Montanans may struggle to tell you who represents them on the PSC. And not many could probably say what the members do. However, in these situations, it’s absolutely critical that our elected leaders give extra scrutiny to this deal because the rate increases will mean an extra burden and sacrifice for hard-working Montanans.

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