Montana’s Public Service Commission pulled the plug on guaranteed rates for small solar projects Thursday at the request of NorthWestern Energy, which said the rates were too pricey for ratepayers.
Commissioners voted 3-2 to grant an “emergency” request from NorthWestern to suspend the state’s guaranteed rate for solar energy projects no larger than 3 megawatts — projects large enough to power 540 or fewer homes. The utility announced in May that hook-up applications from solar companies had unexpectedly surged. NorthWestern blamed the state-set rate.
Tuesday, the PSC obliged the utility, and suspended the rate for all but six solar projects. There had been 97 solar hookup requests since January 2015.
Green energy advocates said the ruling blindsided solar companies developing Montana projects under the PSC’s published terms, which hadn’t changed since 2012.
“Our action today to protect NorthWestern Energy’s customers from unreasonably priced solar power is a compromise that still allows solar energy development to continue across the state,” said PSC Chairman Brad Johnson.
The “unreasonable price,” was actually set by the Public Service Commission four years ago. States are required to set a price and contract lengths in order to promote alternative energy resources under the Public Utility Regulatory Policies Act. It’s something federal law has required states to do for 48 years. Utilities are supposed to be obligated to buy power from qualifying facilities under the state’s terms.
The Montana’s PSC-prescribed rate, locked in by a 25-year contract was $66 a megawatt hour, a price coincidently similar to the price NorthWestern gets for its own hydroelectric power. Thursday, commissioners took turns denouncing their prescribed rate as unfair to NorthWestern Energy customers. And they weren’t alone.
The Montana Consumer Council, the state-created advocate for small energy consumers, said the harm to customers justified granting NorthWestern Energy’s call for emergency action.
“I totally agree with the Montana Consumer Council, that the commission needed to take swift and decisive action in defense of ratepayers,” said Roger Koopman, PSC commissioner from Bozeman. “These outdated standard rates are so inflated that consumers are taking a huge hit.”
Koopman blamed the federal law, known as PURPA, for requiring the PSC to establish rates in the first place. And he blamed solar companies for attempting to profit under the earlier terms set by the PSC.
The PSC will now work to establish a new and lower standard rate for qualifying solar projects, likely by year’s end.
With the standard rate suspended, NorthWestern was reevaluating its commitments to solar contractors.
On June 9, NorthWestern attorney John Alke told the PSC the utility had nine solar farms under contract, mostly with Cypress Creek Renewables of California. He said NorthWestern had also agreed to terms, but signed nothing, with FLS Energy, of North Carolina, for 14 Montana projects to be built in the next 18 months. Alke said NorthWestern would also accept 21 projects from Pacific Northwest Solar of Oregon.
Alke told the PSC that combined the 44 solar projects account for 135 megawatts, more energy than offered by the original phase of Judith Gap Wind Farm. The attorney was explaining how solar energy would develop in Montana, should the PSC grant NorthWestern’s emergency request.
When contacted by The Gazette on Thursday, NorthWestern wouldn’t commit on the 44 solar projects presented to the PSC by its attorney a week earlier.
“We will not know the full impact of the PSC’s order on any of the projects until we have had a chance to read and analyze it,” said Butch Larcombe, a NorthWestern spokesman.
NorthWestern had nine signed agreements for solar projects Thursday, including at six with contracts last week when 25-year contracts for $66 per megawatt hour were still the PSC prescribed terms.
“NorthWestern misled the commission and the commission bought it,” said Anne Hedges of the Montana Environmental Information Center. “Now we’re all at NorthWestern’s mercy to do something on solar.”
Expect lawsuits, said Jeff Fox, of Renewable NorthWest. The solar contractors who were developing multiple projects, some for nearly a year, under the terms set by the PSC, are likely to sue. It was also questionable whether the PSC had the power to suspend the price federal law requires it to set.
Solar companies who submitted testimony against NorthWestern last week said their Montana investment was significant.
North Carolina-based FLS Energy told the PSC it would spend roughly $100 million developing its 14 Montana projects during the next 18 months.
“It’s an absolutely terrible outcome,” Fox said. “My impression is there will be lawsuits. I think that will happen no matter what. But it’s not even the guys that probably file the suit that I feel bad for. It’s all the guys who don’t have the resources.”
Two of Montana’s five public service commissioners disagreed with Thursday’s action.
Kirk Bushman, the commissioner from Billings, who phoned into the meeting, said the PSC shouldn’t have stopped at solar, but targeted all qualifying facilities, or QFs, with its ruling.
“NorthWestern Energy’s customers are completely exposed to extremely inflated prices from all QFs, not just solar,” Bushman said. “Anything short of suspending the full QF tariff is a failure on behalf of the commission.”
But Travis Kavulla, the commissioner from Great Falls, questioned whether the PSC had legal authority to suspend the rates. He had advocated for setting a temporary rate.
“These smaller projects should have the opportunity to obtain contracts at rates that represent the best estimate of what a utility itself would have to spend to supply itself energy and capacity,” Kavulla said. “Rather than updating our rate, the commission has thrown out the availability of those rates entirely. Even if this were a good idea, I do not believe this approach is lawful.”