HELENA — Montana regulators on Tuesday ordered NorthWestern Energy to refund customers $8.24 million that the state's largest power company charged when it had to buy electricity on the open market after a 2013 outage of the Colstrip coal plant.
On a 3-2 vote, the Montana Public Service Commission said NorthWestern failed to take prudent actions to protect customers against the financial exposure from such a massive outage.
The majority of commissioners said the South Dakota-based utility should have taken out insurance or pursued legal action against the plant operator to recover some of the costs incurred because of the outage.
The plant was partially out of commission for about six months after equipment malfunctioned following maintenance work at one of its four power-generating units.
Commissioner Roger Koopman was especially critical of NorthWestern's handling of the debacle. Too often, he said, consumers are left footing the bill.
"There is this culture of 'let the customer pay for all of our miscalculations, for our lack of due diligence, for our mistakes,'" Koopman told the commission. "I don't like it."
Koopman was joined by commissioners Travis Kavulla and Brad Johnson in its order denying NorthWestern from passing on its costs to ratepayers. Commissioners Kirk Bushman and Bob Lake dissented.
Kavulla was disturbed, he said, that NorthWestern did not take precautions during maintenance work that could have limited the risk of damage to the power plant.
The company said it was disappointed by the commission's decision and was reviewing its options.
"We are carefully evaluating the decision and considering our legal options," NorthWestern's vice president and general counsel, Heather Grahame, said in an email.
"It is particularly disappointing that Montana is disallowing these outage-related costs when no other state utility commission has found the utility was imprudent as it relates to the 2013 Colstrip Unit 4 outage," she said.
Company spokesman Butch Larcombe added that it was too soon to calculate how much in credits the utility's 360,000 electric customers might get as a result of the commission's order, which is expected to be finalized in May.
Environmental groups and consumer advocates applauded the commission's action.
"It's absolutely a victory for consumers," said Derf Johnson, the clean water program director for the Montana Environmental Information Center.
Johnson said despite Tuesday's victory, he remains wary of the continued operation of the Colstrip plant, saying that it was time for NorthWestern to explore cheaper and cleaner sources of energy.
"Colstrip is an unreliable and expensive source of energy," said Jenny Harbine, an attorney for Earthjustice who represented conservationists in the commission's proceedings.
Bushman, whose district encompasses the Colstrip area, said the commission's decision added to the uncertainty surrounding coal-fired generating units in Montana. He said the ratepayers of Montana will eventually pay the price if Colstrip closes.