The Montana Senate has agreed to commit NorthWestern Energy customers to paying the utility $75 million as part of the company's plan acquire a larger stake in the troubled Colstrip Power Plant.
The Senate on Wednesday voted 32-18 to commit customers to covering certain plant costs related to NorthWestern Energy's acquisition of 150 megawatts of Colstrip Unit 4. It also committed the customers to fully compensating NorthWestern Energy for any future share of the power plant. That customer obligation would continue even if the power plant closed early. Senate Bill 331 also prevents state regulators from scrutinizing the terms set by the Legislature.
The vote was mostly partisan, though two Democrats, Jon Sesso, of Butte, and Gene Vuckovich, of Anaconda, backed the GOP plan.
Supporters framed the bill as necessary to protect NorthWestern Energy customers from blackouts. They suggested that although SB331 plans for early closure of the power plant, it is actually extending its life and protecting the power plant's namesake community of 2,300 people.
“This regulated utility’s customers have some risk of blackout and unusually high rates because under the current structure, they rely heavily on market power,” said Sen. Tom Richmond, the bill’s Republican sponsor.
Wednesday’s Senate floor session wasn’t the first time foreshadowing of blackouts had been suggested. Senate Republicans have for weeks messaged that coal power was essential to preventing NorthWestern blackouts. The claim has been balked at by utility experts like former Public Service Commissioner Travis Kavulla, also a Republican.
In hearings, NorthWestern has cautiously stated that increasing its Colstrip share is a possibility, but not a sure thing, in which case, customers would be off the hook for the $75 million related to potential new Colstrip shares.
The $75 million the Legislature is committing NorthWestern customers to paying, Richmond said, assures the company a return on its investment. The amount is for “capital improvement costs that are required because of environmental compliance, reliability issues and improvement of the plant,” he said. Originally, Richmond committed customers to paying $40 million over five years, but the price was increased and the payment period extended to a decade through amendments Wednesday.
“Because there is risk in acquiring this kind of investment, we have discussed with the utility the amount of time necessary for them to have their investment returned without direct approval of the Public Service Commission,” Richmond explained. “So the bill, as you see, has been amended. The original bill called for about $8 million a year for five years. This lowers that to about $7.5 million a year, but extends it for 10 years.”
Republicans have framed NorthWestern’s possible purchase of more coal-fired generation as a deal too good to pass up, a chance to increase investment in a coal asset for $1, as the other four utility companies with Colstrip ownership plan early exits. However, SB331 also lays plans for early closure.
The bill would limit a possible NorthWestern purchase to a 15-megawatt share, which could give the South Dakota-based utility 50 percent ownership of Colstrip Unit 4. This deal is made possible by Colstrip’s other utility owners fleeing fossil fuel energy for green power, Richmond said.
Coal power versus green power has been an often-cited subplot for the need to pass SB331. Richmond has characterized the bill’s opponents as renewable energy advocates wanting to shut Colstrip down. The reliability of Colstrip power, though Unit 4 has experienced shutdowns in recent years for mechanical problems and emissions failures, has been compared as more reliable than the 22 percent renewable energy in NorthWestern’s portfolio. The wind doesn’t always blow, the sun doesn’t always shine, Richmond said.
In Oregon and Washington, where more than 2 million utility customers use Colstrip power, compared to NorthWestern’s 370,000 customers, there’s a push to get out of Colstrip. Washington utilities are making plans to be financially ready to exit Colstrip by 2027. In Oregon, state law requires one Colstrip owner to cut the cord on coal power by 2030, a second owner by 2035.
Senate President Scott Sales, R-Bozeman, said those decisions in the Pacific Northwest would be regretted.
“I think in the long run, as the West Coast legislatures have decided along with their governors that they don’t want any carbon-generated electricity, they’re going to regret that decision because quite frankly you can’t just be renewable energy. You have to have some reliable base of carbon fuel to support the lower end,” Sales said.
Other utilities exiting Colstrip haven’t penciled all fossil fuel energy from their future energy plans, just coal. Colstrip’s largest stakeholder, Puget Sound Energy, is building new natural gas generation to meet its future needs. Natural gas and renewable energy have become more affordable than coal power in the past few years. Nationally, natural gas has replaced coal as the primary fuel for power plants, according to the federal Energy Information Administration.
Although electricity from natural gas is a small share of NorthWestern’s portfolio, the company has indicated it will likely build enough natural gas generation by 2025 to add another 800 megawatts to its portfolio.
Opponents of SB331 said the bill saddled NorthWestern Energy customers with debt and risk. There's nothing stopping NorthWestern from increasing its investment in coal power without SB331, they said. The utility should do so if it wants, opponents said, and leave customers out of it.
“The utility in question does not need this bill to buy the share, any additional share in Colstrip. They can just do it. They have chosen not to. And I think they probably have their reasons, and they’re probably pretty good ones. What they do need the bill for, and what the bill does is remove regulatory oversight for the new acquisition,” said Sen. Mary McNally, D-Billings. “And in that way it protects the utility shareholders, and it puts any potential risks on the ratepayers. That’s what this bill does.”