HELENA — State utility regulators Tuesday approved sweeping rate changes for NorthWestern Energy's electric and gas customers, including new "tiered" electric rates for homeowners and other mechanisms meant to encourage conservation.
The Montana Public Service Commission voted 4-1 to approve the changes, which will increase overall electric rates about 1.5 percent from summertime levels. Natural gas rates will be largely unchanged.
When NorthWestern's 330,000 customers look at their bill next month, they'll actually see a decreased rate, because the PSC temporarily raised rates in July, anticipating an eventual permanent increase at a higher level.
Tuesday's final ruling — the result of a settlement among the company, the Consumer Counsel and other consumer groups — ended up installing rates lower than the temporary increase.
NorthWestern not only will lower the temporary rates to the new level starting in January, but also will refund to customers over the next six months the excess collected since July.
Commissioner Brad Molnar, R-Laurel, was the only PSC member to vote against the rate changes.
He said the tiered rates and conservation mechanisms would end up hurting many customers financially, and that the decision amounted to "social engineering" to achieve energy conservation, regardless of how it impacts customers.
"The people I know will take a whipping," he said. "This is simply not defensible in, in any high school auditorium across the state."
Molnar said it would make more sense to educate people about conservation measures and let them take their own actions to save energy.
Other commissioners adamantly disagreed with Molnar, saying the new rate structure will not only encourage conservations efforts but also reward those consumers who use less energy.
"Consumers and ratepayers really are the first line of defense to keep their rates low," said Commissioner John Vincent, D-Gallatin Gateway. "We as the PSC should be promoting that."
NorthWestern Energy rate changes approved Tuesday by the PSC include:
— "Tiered" electric rates, where residential consumers are charged less for power under 350 kilowatt hours (kwh) per month and gradually more for power consumed over that amount.
If a consumer uses the average monthly amount of 750 kwh, their rate would be unchanged. If they use less power, their rates would decline. PSC staffers produced a graph showing that nearly two-thirds of NorthWestern customers would pay lower rates under the proposal, at current usage.
Tiered rates are not in effect for natural gas.
— A four-year pilot program of "decoupling," which promises NorthWestern a set amount of revenue for electricity sold to residential and small business customers, regardless of how much energy is actually consumed. The idea is to allow the utility to promote more conservation programs, without fear of losing revenue.
The PSC on Tuesday slightly decreased the amount of return that NorthWestern can earn — a move the company said caused it concern.
— The 1.5 percent increase in electric rates for homeowners and a negligible decrease for natural gas rates.
— Slight decreases in rates charged to large business customers.
Commission Chairman Greg Jergeson, D-Chinook, called the case a "signal accomplishment on behalf of the ratepayers of Montana," as well as the company.
"It's just altogether good work," he said.
NorthWestern Energy spokeswoman Claudia Rapkoch said the rate increases are to cover the company's cost of doing business, as materials, labor and other costs have risen in the past several years.
"We do everything we can to try to minimize the impact to our customers," she said. "Rate increases are never something that anyone looks forward to. But we were only asking for what we thought was absolutely necessary."