Montana and the nation are at the crux of a changing energy future. What that future will look like depends on the choices we make now. These choices will require some tough decisions by both electricity consumers and the regulators of our utilities at the Montana Public Service Commission. Regulated electric and gas utilities in Montana include Northwestern Energy and Montana-Dakota Utilities in the eastern part of our state. Electric co-ops are not regulated by the PSC.
The challenge for electricity providers and regulators is how to incorporate alternative forms of energy such as wind, biomass, solar and geothermal into our system as a long-term investment toward clean energy and energy independence. As with most investments, the payoff comes over time, perhaps even over a lifetime. Judith Gap, Montana's first wind farm, came online in 2006, and customers are already seeing the benefits. The 135-megawatt facility supplies 8 percent of NWE's energy needs at a cost of about $40 per megawatt-hour. considerably less than the cost of electricity produced at the coal-fired power plant in Colstrip
Value of conservation
The cost of new generation and transmission, no matter what the resource, is always more expensive than conserving energy — often double the price or more. The energy we don't use — energy efficiency — is by far our cheapest resource. So, whether we build a new wind farm or commission a new coal-fired power plant, the costs for building the facility as well as generating and transmitting the electricity will be incorporated into the rates customers pay on their utility bills. This is a simple fact of regulation. By law, our regulated utility companies are guaranteed the right to recoup the prudently incurred costs of providing reliable electricity to their customers. This principle also applies to other regulated utilities such as water and telephone. Utilities recoup their costs through the rates they charge. In addition, regulated utility companies have the opportunity, but no guarantee, to make a reasonable profit.
The ability of a regulated utility to obtain capital, retire debt, and produce energy efficiently is directly related to its Wall Street credit rating. The higher the rating, the lower the cost of capital and the lower the cost of retiring debt, both of which are incorporated into the rate making process. It is of direct financial benefit to customers to have a healthy utility with a high credit rating. After years of struggling through bankruptcy and an attempted buyout by a foreign company, NWE is once again on solid financial ground. Part of the credit for this transformation goes to the PSC for doing its job regulating the business of the company.
NWE and MDU are regulated for a simple reason: They are monopolies. Since customers of these utilities do not have a choice about where to purchase their electricity, these utilities fall under the purview of the PSC. It is up to the PSC to see that utility companies practice sound accounting, prudently incur costs and provide safe and reliable service.
PSC regulators, who are also charged with ensuring that customers pay fair, just and reasonable prices, work hard to find a reasonable balance. This is not always an easy task.
The results of our decisions have a direct impact not only on your utility bills, but also on the course of our energy future. It's important that customers understand what rates are based upon and why. It's important that we work together to choose our energy future wisely.
Gail Gutsche represents District 4, which includes Powell, Granite, Ravalli, Missoula, Mineral, Lincoln and Sanders counties on the Montana Public Service commission. She can be reached at 406-444-6167 or email@example.com.