Montana’s utility regulator is warning that the latest bill to bail out Colstrip Power Plant could cost NorthWestern Energy customers as much as $1.9 billion.
The Public Service Commission voted unanimously Tuesday to oppose Senate Bill 379, a bill that places all the financial risks associated with buying more of the troubled power plant on NorthWestern Energy customers.
“The bill, it looks like, is entirely a wish list for NorthWestern Energy. I bear them no ill will, I’m just commenting on the bill, that it’s a complete abrogation of responsibility for NorthWestern shareholders and the transfer of all liabilities to ratepayers. And I find that to be incredibly egregious,” said Commissioner Tony O’Donnell, a Billings Republican.
Basically the bill, brought by Sen. Steve Fitzpatrick, R-Great Falls, obliges the utility’s customers to pay for any additional shares of the power plant NorthWestern buys, plus associated repairs and environmental cleanup. Utility regulators wouldn’t be able to reject any purchase considered risky for customers. And, regulators wouldn’t be able to set limits on what customers paid for additional Colstrip shares.
Additionally, there is $272.4 million yet to be paid off on what NorthWestern owns of Colstrip. Customers would be obligated to pay that debt regardless of whether the power plant closes years earlier than expected.
The power plant’s future, and NorthWestern’s investment in it, has grown increasingly vulnerable as Colstrip’s majority owners ready for coal power bans in Washington and Oregon. The first ban in Washington comes in at the end of 2025 and affects Puget Sound Energy, Avista and PacifiCorp. Oregon’s two-stage ban starts in 2030 and affects PacifiCorp and Portland General Electric.
Together those utilities claim a 70% ownership share in the southeast Montana power plant. And, those power plant owners have agreed to be financially ready to exit when the bans come, if not sooner. Most have been stakeholders since the 1980s.
NorthWestern is a latecomer, with a 15% power plant share overall that’s rooted in its 30% share in Colstrip Unit 4. Headquartered in South Dakota, the utility has roughly 374,000 metered customers in Montana who were put on a 33-year payment plan back in 2009 to compensate NorthWestern for its $187 million Colstrip purchase two years earlier. The assumption was that Colstrip would operate at least until the debt was paid in 2042. The bill customers were committed to paying was $407 million at 8.25% interest.
Asked about SB 379, NorthWestern Energy issued the following statement:
"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."
Public Service Commissioner Randy Pinocci also suggested Montana faces an energy fate as bad as the Texas power meltdown during a freeze last month. In that freeze several generators, including coal-fired power plants, failed.
In its latest annual report to shareholders, NorthWestern estimates its Montana customers still owe $272.4 million on Colstrip. For the second Legislature in a row, Republican lawmakers have proposed bills assuring Montanans will pay the debt regardless of whether the power plant continues to run.
Fitzpatrick did not respond to an interview request for this article. The son of NorthWestern’s former director of government affairs, the Great Falls attorney has done the heavy lifting on Colstrip bills concerning NorthWestern this Legislature, including bills that nullify portions of the Colstrip Owners' and Operation agreement, should Colstrip’s majority owners object to paying for maintenance and repairs at the power plant deemed necessary by the state government. NorthWestern began lobbying for state intervention on repairs after the power plant’s short-timer majority began objecting to repairs unnecessary to keep the plant running beyond 2025.
Senate Bill 379 would base what customers owe for new shares in the power plant on a rate of about $1.5 million per megawatt of purchased capacity. The PSC staff calculates that should NorthWestern acquire the entire plant, customers would owe $1.9 billion, regardless of what NorthWestern paid for the shares. 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.
"This fictional 'investment' of $283 million would have an associated annual revenue requirement of $38 million, or approximately $100/year for each NorthWestern Energy customer, with an assumed retirement of Colstrip in 2042," PSC staff estimated in a report.
The bill doesn’t state that Colstrip must continue to operate for NorthWestern to be compensated, something that Anne Hedges, Montana Environmental Information Center co-director, zeroed in on.
“This has nothing to do with saving Colstrip,” Hedges said. “This has to do with NorthWestern bilking ratepayers, whether Colstrip is operating or not.”
MEIC doesn’t think it’s likely NorthWestern acquires the entire power plant, which would create the $1.9 billion debt, estimated by PSC staff as the extreme consequence of SB 379. The power plant is too big for NorthWestern’s customer base in Montana, Hedges said.
More likely is that NothWestern acquires the remaining 70% of Unit 4, which MEIC estimates would cost Montana consumers more than $1 billion. That estimate is aligned with the $1.5 million per megawatt PSC staff expects customers would be billed for capacity.
There’s also the issue of what costs get passed onto customers when Colstrip breaks down. Twice, NorthWestern as requested to pass on those unanticipated costs to customers, but has been turned down by the PSC, which concluded the expenses were avoidable. Most recently commissioners rejected a $9.4 million related to 2018 power purchases, including more than $5 million related the Colstrip Unit 4 malfunctioning that summer. But Senate Bill 379 makes it difficult for the PSC to prevent those costs from being passed to customers.
Two commissioners who voted to oppose the bill. Randy Pinocci, of Great Falls and Brad Johnson, of Helena, said that although the bill was harmful to consumers, they thought it raised issues on the need for baseload power, that is power that can be dispatched whenever needed, something NorthWestern has insisted Colstrip can do.
“I agree this is a fatally flawed bill as it is written, but the intent is not fatally flawed. The fact if the matter is the ratepayers are at a big risk if we don’t see some additional dispatchable baseload generation come onto the system,” Johnson said. “I want to make sure our opposition to this bill doesn’t in any way suggest that we don’t understand the importance of shoring up that system with additional baseload.”
Worth noting is that when NorthWestern applied for preapproval in 2019 to buy more of Colstrip Unit 4, it did not state that the extra share would serve as a baseload resource.