Major Colstrip bill clears Senate

Senate Bill 379 passed third reading on a 27-21 vote. The bill has been transmitted to the House where it will get another committee hearing next week before heading to the floor.

Colstrip’s future is in doubt. Four of the power plant’s utility owners face coal-power bans in Washington and Oregon, the first starting in 2025. NorthWestern, which bought into the plant 14 years ago, says it would stay, but only under the terms of SB 379.

However, those terms pose significant risks to Montana consumers, in the form of power plant debt and higher energy bills, analysts warn. The consequences could remain on Montana energy bills for 20 years.

“What this does is create an acceptable business plan for us to move forward. And this the only way we would increase our interest at Colstrip,” NorthWestern Energy lobbyist David Hoffman told lawmakers last week. “And without an interested, engaged party, coming into Colstrip with increased ownership interest, or a new interest, we’re looking at Washington state statute that says those coast owners can’t take any more coal power into their rate base after 2025. That would probably, most likely, be the end date for Units 3 and 4.”

Under the terms of SB 379, NorthWestern would acquire shares of Colstrip Power Plant from exiting owners. There seems to be opportunity to do so. Less than a year ago, Colstrip owner Puget Sound Energy was attempting to sell its share of Colstrip Unit 4 for a dollar. Spokane-based Avista Corp. said in documents last week that getting out of Colstrip Units 3 and 4 as soon as possible was in its best interest.

But there would be no dollar deal for NorthWestern’s customers under SB 379, which is one of the concerns raised by analysts for the Montana Public Service Commission. Commissioners have called the bill unacceptable and a NorthWestern Energy wish list.

SB 379 says that regardless of what NorthWestern pays for additional Colstrip shares, customers will pay a rate based on the book value of NorthWestern’s existing Colstrip stake, prorated to the size of whatever NorthWestern buys. That $1 offer from Puget Sound Energy for a 25% interest in Colstrip Unit 4, would cost Montana customers $283 million, or put another way, $100 a year, for each residential customer through 2042. That’s what PSC analysts concluded. If NorthWestern bought the entire power plant, customers would be liable for $1.8 billion over that period.

The bill assures NorthWestern full recovery of its investment, meaning whether or not the power plant continued to operate, customers would have to fully pay off the debt. A Tuesday amendment assures that only NorthWestern can decide when the plant retires, a break from the normal practice of allowing utility commissioners to decide whether a power plant has become too uneconomical for consumers. 

There are other consumer burdens. Senate Bill 379 assures NorthWestern that if it has to buy replacement power, should Colstrip malfunction, customers will pick up the bill, unless the PSC can prove the costs weren’t justified. That’s not what happens currently. Under current rules, before billing customers for replacement power, it’s Northwestern that must justify the costs, to the PSC which is how it works in other states, too. The PSC is a quasi-judicial body that regulates monopolies.

Twice since buying into Colstrip, NorthWestern has failed to prove that its replacement power costs related to Colstrip were just. In 2016, the commission rejected $8.2 million in replacement power costs related to a Colstrip break down. Last year, the commission rejected $5.7 million for another malfunction, reason being that the expense could have been avoided.

Sen. Steve Fitzpatrick, the bill’s sponsor, told his colleagues Tuesday that there was no method for determining what replacement power costs were repaid.

“There are no rules for when these outages are compensated or not. What this bill simply does is establish parameters for when there are outages and when the utility is entitled to obtain compensation in these circumstances,” Fitzpatrick said.

What Fitzpatrick said isn’t correct. There are laws governing compensation for cost recovery written into Title 69 of the Montana Code Annotated, most recently modified by the Legislature in 2019.

Fitzpatrick has been frustrated by the PSC analysis of his bill. He suggested March 30 that the commission staff hated SB 379 and said that the staff memo about the bill was proof.

Not one but two staff memos cautioning about consumer risks have been entered into the record of proceedings.

Wednesday, before the Senate voted to pass SB 379 on second reading, Fitzpatrick suggested an amendment to keep all future PSC staff memos inaccessible to the public. Both are included with the online version of this article.

Fitzpatrick is the son of former NorthWestern Energy Director of Government Affairs, John Fitzpatrick, once the utility’s key lobbyist at the Legislature.

Steve Fitzpatrick is also the sponsor of two bills allowing the state of Montana to override the private business agreement that has governed Colstrip Power Plant for four decades. One bill would empower the attorney general to force power plant owners to make repairs or face fines of $100,000 a day. NorthWestern has been on the losing end of repair decisions at the power plant, which by contract are decided by majority vote of the owners. The other bill would force arbitration to take place in Montana, instead of Spokane as the contract specifies.