The latest bill to bail out coal-fired Colstrip Power plant is drawing critics, including former Montana Democratic Gov. Brian Schweitzer, who says the bill is a crony capitalism at its worst.
Scheduled for a Tuesday hearing by the Senate Energy Committee, Senate Bill 379 obliges NorthWestern Energy customers to pay for any additional shares of the power plant the utility buys, plus associated repairs and environmental cleanup. Those terms could cost the utility’s customers up to $1 billion per power plant unit, according analysis by Montana’s Public Service Commission and, taken to the extreme, $1.9 billion for ownership of Colstrip Units 3 and 4.
The power plant’s future, and NorthWestern’s investment in it, have become increasingly vulnerable as the majority of Colstrip’s owners, who have a 70% stake in the plant, prepare for coal-power bans in Washington and Oregon. Already, there have been two bills, SB 265 and 266, empowering the state government to nullify portions of the Colstrip owners’ contract in order to keep short-timer owners from objecting to repairs.
“What they’re saying right now, is that this company from South Dakota can change the laws so that private businesses, who write private contracts with one another, can have those contracts changed to the benefits of one company, NorthWestern Energy,” Schweitzer said. “It’s stunning. The state wasn’t a party to the contract.”
Yet another bill, Senate Bill 260, would require government reimbursement for the cost of regulations. Schweitzer said the risk of the government imposing repairs on Colstrip owners, is that taxpayers could be on the hook for reimbursement.
Sen. Steve Fitzpatrick, a Great Falls Republican, is the sponsor of SB 379 and the two bills overriding the Colstrip Ownership and Operation Agreement. Interview requests were left on Fitzpatrick’s voicemail March 22 and March 26. He was also emailed questions for this article, but didn’t respond. Steve Fitzpatrick is the son of John Fitzpatrick, NorthWestern Energy’s former government affairs director.
The first coal-power ban affecting Colstrip starts at the end of 2025 in Washington state, where owners Puget Sound Energy, Avista Corp. and PacifiCorp have agreed to be financially ready to exit the plant no later than 2025. Additionally, PacifiCorp and Portland General Electric face coal power bans in Oregon that begin in 2030. That leaves NorthWestern Energy, which has a 30% share in Colstrip Unit 4 and Talen Energy, which has a 30% share in Colstrip Unit 3.
Talen told Montana legislators March 24 that it would stay on at Colstrip as long as the power plant remained economical, though others noted Colstrip Units 1 and 2 shut down just 15 months ago after owners Talen and Puget declared the generators uneconomical. The announcement that the units would close came a month after the adjournment of the 2019 Legislature, during which no one indicated the units would be closing.
Similarly, lobbyists for power plant owners are telling lawmakers 2025 isn’t a hard-and-fast exit date, though they’ll have no customers to sell power to in Washington. Idaho, which receives Colstrip Power from Avista, has indicated it doesn’t want to be the last stop for the utility’s coal power once the Washington ban kicks in.
There are changes coming in Colstrip and Rosebud County. The energy giant NextEra Energy Resources is developing a 750-megawatt wind farm in Rosebud, Garfield and Custer counties with plans to connect to the grid at the Colstrip substation. And, Talen Energy is partnering with Pattern Energy to develop a wind farm of its own in the area. The power plant co-owner and operator has a landman and an offer sheet prepared for area property owners interested in leasing land for wind turbines.
The risks for Montana consumers is that NorthWestern will be the last utility owner of the power plant, with customers paying the bill, whether or not the power plant continues to run, said Tom Schneider, a former member of the Montana Public Service Commission. Nothing in Senate Bill 379 requires the power plant to continue running. Nothing in the bill requires NorthWestern to use Colstrip for “baseload” power, meaning power that’s always available.
What the bill does do is guarantee NorthWestern that customers fully pay the $407 million, at 8.25% interest, which they were committed to in late 2008, one year after NorthWestern bought its 30% share of Unit 4 for $187 million. That debt would be repaid regardless of whether the power plant is shut down.
“Remember, they didn’t pay that $407 million they got put into rate base in 2008. They paid $187 million. The rest of that is pure gravy,” Schneider said. “They’ve been milking that cow since 2008. The idea that they’re going to be treated unfairly and damaged if the unit goes down before they want it to, I think is hogwash.”
The estimated amount of what customers still owe in Colstrip debt is $272.4 million. At the time the debt was approved by the PSC, Colstrip Unit 4 was assumed to run until 2042.
Much of Schneider’s assessment of what SB 379 would mean for consumers is based on analysis in a PSC staff memo that the current commission reviewed before voting unanimously to oppose the bill. That analysis suggests that NorthWestern customers would be billed $1.5 million for every additional megawatt of capacity the utility acquired from other owners. The bill presents a formula for determining the debt, leaving the possibility that customers would again pay considerably more for the power plant shares than NorthWestern did.
Last year, NorthWestern attempted to buy an additional 25% share of Colstrip Unit 4 for the aggregate price of $1. In the current scenario, customers would be put on a $283 million debt schedule for that 25% share, which would increase bills by $100 a year on average through 2042, according to PSC analysis. After that purchase, there would still be another 45% of Unit 4 to put into rate base before the utility owns the unit outright.
NorthWestern said little about the PSC analysis of SB 379. Asked about the assessment on March 24, utility spokeswoman Jo Dee Black said in a text: "NorthWestern Energy supports legislation that helps provide reliable capacity for the state of Montana. The events in Texas in February and in California last summer are reminders of the consequences of having inefficient electricity for customers."
NorthWestern wants more generation capacity and it supports bills that help provide reliable capacity, she said.
There isn't a Colstrip Power Plant share being offered now, Black said Saturday, which means the PSC estimates aren't based on an actual offer.
Regardless of what an additional power plant share cost NorthWestern Energy, Senate Bill 379 assures that what customers pay won't be based on the utility's purchase price. Rather, what customers pay would equal the book value of the existing ownership interest scaled to the size of what NorthWestern bought. It's the SB 379 formula that PSC staff used to estimate that the share NorthWestern attempted to buy for a dollar in 2020 would cost customers $283 million using the terms of SB 379 in a hypothetical sale.
Analyist David Schlissel, of the Institute for Energy Economics and Financial Analysis, said that based on Talen Energy’s reports to the Energy and Information Administration, Unit 4 generation hasn’t been that constant. The Unit’s annual capacity factor was 50% in 2020. Since customer were put on a billing schedule for Unit 4, the capacity factor is about 69%.
At a time when NorthWestern indicates it wants more coal power, other utilities are getting out because the other energy sources including natural gas and renewable energy are cheaper, Schlissel said.
“If Colstrip continues to operate, it will be an island of coal in a sea of renewables, from Colorado to the Pacific Ocean,” Schlissel said.