Consumer witness: NW dam purchase a bad deal for consumers, unless altered

2014-07-15T13:45:00Z 2014-07-22T14:12:15Z Consumer witness: NW dam purchase a bad deal for consumers, unless alteredBy MIKE DENNISON Gazette State Bureau The Billings Gazette

HELENA — The lead witness for a Montana consumer-advocate office said Tuesday that if regulators approve NorthWestern Energy’s $900 million purchase of a dozen hydroelectric dams without changes, it will mean guaranteed profits for the company and much higher costs for ratepayers.

John Wilson, an economist for the Montana Consumer Counsel, said the company should be open to compromises that would shift more of the risk and cost of the acquisition to the company and its shareholders.

“The company seems to be unable to accept a compromise on any of these things,” he told the Public Service Commission on Tuesday morning, on the sixth day of a PSC hearing on whether to approve the dam purchase. “They are the ones saying, 'Give us everything that we want, or we’re going to walk.' 

“There has to be some compromise, some give, so that the only beneficiary here is not the hedge funds and the institutional investors that own 93 percent of NorthWestern’s common stock.” 

Wilson is the first consumer witness to testify at the PSC hearing on the proposal — a hearing that began a week ago and is likely to run the rest of this week.

The five-member PSC, which regulates utilities in Montana, is expected to decide later this year whether to approve the $900 million purchase, allowing NorthWestern to charge ratepayers for the cost.

The company has argued that buying the dams, which were owned by its predecessor Montana Power Co. before being sold in the wake of Montana’s 1997 deregulation law, would provide a stable, affordable source of power for consumers for years to come — instead of relying on an unpredictable market.

NorthWestern announced last September it had agreed to pay $900 million to buy the dams from PPL Montana, which bought them from Montana Power Co. in 1999. 

As proposed by the company, the purchase would increase NorthWestern’s homeowner electric rates by about 6.5 percent, making them nearly the highest of any major electric utility in the region.

The Consumer Counsel, a state office that represents consumers in cases before the PSC, has argued that the purchase doesn’t benefit consumers — unless some conditions are attached to the approval. 

Wilson said NorthWestern should be required to share more of the risk of future maintenance costs and predicted costs of carbon regulation, which are essentially is charged to ratepayers as part of the proposal.

A competitive market for power now exists in the Pacific Northwest, Wilson said, and its costs appear to be much lower than the rates that would be installed for many years by approval of the dam purchase.

NorthWestern wants to supplant that competitive market with power from the dams, and should make some changes in its proposal that bring the cost closer to what’s available on the foreseeable market, he said.

Wilson also said the increased cost of paying for the dams falls primarily on residential and small-business customers of NorthWestern.

NorthWestern attorneys declined to question Wilson on Tuesday morning, but will have a chance later in the day to question him.

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