Montana’s Public Service Commission staff accused NorthWestern Energy on Friday of repeatedly trying to undermine the state’s ability to protect consumers.
The charge came as NorthWestern and Republican Sen. Tom Richmond of Billings made their case for stopping the PSC from setting contract lengths or determining how long customers are obligated to pay for energy purchases. Richmond’s Senate Bill 199 is one of several bills this Legislature that pushes back against the ways the PSC can balance customers' right to a fair price with a utility's reasonable right to profit.
“This bill is one of several that has been brought to the Legislature this session by one specific utility that disagrees with commissioner decisions and is trying to undermine the traditional regulatory structure that the Legislature put in place,” said Robin Arnold, PSC analyst.
Arnold's remarks were the first time anyone speaking for the PSC had testified that NorthWestern was trying to weaken the commission.
The PSC gets its power from the state Legislature, and limiting that power takes legislative action, as well. SB 199, heard Friday by the House Energy, Technology and Federal Relations Committee, addresses a 2017 PSC decision that didn’t sit well with NorthWestern.
In 2017, commissioners reset the rates and contracts for new Montana energy projects big and small, scaling the contract back from 25 years to 15. The action came as energy prices were dramatically falling and long-term deals agreed to by the PSC just years before appeared to lock NorthWestern’s customers into paying more than double the free market price for electricity, perhaps for decades.
Three years earlier, the PSC had approved NorthWestern’s nearly $900 million purchase of 11 PPL-owned hydroelectric dams. The 2014 agreement committed consumers to paying more than $60 a megawatt for hydropower over 30 years.
The dam power was priced higher than the free market rate at the time, but the assumption was that eventually the market price would exceed the dam rate and customers would come out ahead. That didn’t happen; market prices fell as natural gas and renewable energy became more affordable.
The PSC has since steered away from both long contracts and rates set far above market price.
The PSC ruling for shorter contracts was wildly unpopular, not only with NorthWestern, but also with third-party developers of wind and solar projects, who said 15-year contracts were too short to present to lenders for financing.
David Hoffman, NorthWestern’s government affairs director and primary lobbyist, said at Friday’s hearing his employer was reluctant to issue a request for proposals for new generation under the terms set in 2017.
“Since this order was issued in 2017, NorthWestern hasn’t put out another RFP just because of the difficulty it presents to utility-owned generation,” Hoffman said.
There was no mention in SB 199 of preventing the PSC from shortening the contract terms for renewable energy developers. From the outset, in 2017, NorthWestern has sought an exception for itself only.
Arnold asserted that NorthWestern’s long contracts were as costly to consumers if not more so than the longer renewable contracts also targeted by the PSC. The longer the contract, the bigger the risk that the forecast price will turn out to be a bad deal for customers, she said.
“The commission concluded that a 25-year maximum contract length exposes customers to undue market forecast risk,” Arnold said. “The commission also found that NorthWestern’s own resources are contributing to the same market forecast risk, often to an even greater degree.”
There was another long NorthWestern contract raised at the hearing as not working out for customers. In 2008, the PSC committed NorthWestern's customers to compensating the utility for its purchase of a 30 percent share in Unit 4 at Colstrip Generation Station. The contract assumed the coal-fired unit would burn until 2042. During that 34-year-period, NorthWestern’s captive customers would pay the company $407 million as compensation for the purchase.
It’s now uncertain whether Colstrip Unit 4 will provide NorthWestern customers power through 2042, and NorthWestern, in partnership with Richmond, is asking the Legislature to keep customers on that 34-year payment plan regardless of whether the unit shuts down early, perhaps decades early.