HELENA — The state Public Service Commission Tuesday voted 4-1 to approve a $32 million annual, temporary rate increase for NorthWestern Energy’s electric customers in Montana starting next month.
Residential electric rates for NorthWestern’s 342,000 customers in western and central Montana will go up about 6.5 percent on July 1, or $5 a month for an average household.
NorthWestern requested the rate increase nearly three weeks ago, saying it had underestimated costs of buying power for customers for the past year and needed to recover those costs going forward.
The rate increase is considered temporary because the five-member PSC will take a closer look at NorthWestern’s request later this year and could adjust it if the PSC finds that it’s not justified.
Commissioner Roger Koopman, R-Bozeman, said the PSC wasn’t really approving an increase, because it’s only temporary and the PSC will examine it later.
“We will have plenty of time later … to very vigorously look into the merits of (this case) and determine prudence (by the company),” he said.
Yet Commissioner Travis Kavulla, R-Great Falls, who voted against the increase, said NorthWestern had presented few details on why the shortage occurred, including costs linked to a seven-month outage at the Colstrip 4 power plant.
“NorthWestern was still getting a return on (investment) in the plant while it’s not operable, and still asking for a 100 percent replacement of its costs for (buying power),” Kavulla said. “They’ve provided only two pages of explanation. It’s not enough.”
The Colstrip 4 plant tripped offline in July 2013, indicating a “ground fault” in the generator, NorthWestern said. The repair plan took nearly seven months.
Kavulla argued that the temporary rate increase should at least exclude the Colstrip shutdown costs, which a PSC staffer estimated at $11 million.
Koopman dismissed that notion, saying if the PSC denied those costs now and decided later they should be included, ratepayers would still end up paying for them.
“Wouldn’t it be wonderful to grab a headline to say we stood for the consumers today and voted down this motion for an interim rate increase and reduced it by a third,” he said. “Gosh, wouldn’t that be just great? … And then we’d have to explain later to consumers how we visited more expense on them.”
NorthWestern requested the increase as part of its annual electric “tracker,” which is supposed to align the utility’s rates with costs it incurs buying power for its customers.
Claudia Rapkoch, spokeswoman for NorthWestern Energy in Butte, said the tracker mechanism has been forecasting much lower electricity market costs in the coming year, automatically adjusting rates downward for the past year.
However, costs didn’t end up dropping that much, so the company now must collect more money to cover its actual costs of buying electricity on the market to serve customers, she said.
The company also had to buy power to replace electricity it expected to get from the Colstrip 4 plant, which was out of service from July 2013 through late January this year. NorthWestern owns a portion of the Colstrip plant and normally uses that power to supply its customers.
The increase does not include any additional costs that NorthWestern would incur from buying 12 hydroelectric and storage dams from PPL Montana. The company is proposing to buy the dams for $900 million, and fold that cost into rates later this year.