HELENA — After a lengthy discussion, a divided state Public Service Commission on Tuesday approved an approximate 6 percent increase in electric rates for Montana-Dakota Utilities’ 25,000 customers in far Eastern Montana.

The five-member panel voted 3-2 to adopt a negotiated settlement between MDU and the Montana Consumer Counsel, setting the increase at about half what the Bismarck, N.D., utility had asked for a year ago.

MDU said the increase is needed to pay for the company’s increased investment in two wind power projects near the Montana-North Dakota border and related infrastructure.

Company spokesman Mark Harmon said Tuesday that MDU feels the outcome is a “fair settlement.” Most of MDU’s Montana electric customers are in Miles City, Sidney and Glendive.

The Consumer Counsel, the state agency that represents Montana consumers in rate cases before the PSC, had initially argued that MDU should get an even smaller rate increase, but agreed to settle for the overall 6.23 percent adjustment.

MDU originally asked for a 13 percent increase and was granted a temporary increase in February of just more than 6 percent. The final increase approved Tuesday is nearly identical to the temporary increase, so rates will remain the same.

Residential customers of MDU in Montana will end up with a 5 percent increase over what they paid before February, while most business customers will pay slightly higher rates.

For a homeowner using 800 kilowatt-hours a month, a monthly bill is about $3 higher.

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While the company and the state’s consumer office agreed on the increase, PSC members spent nearly two hours arguing over the case Tuesday before voting 3-2 to approve it.

Commissioners Travis Kavulla, R-Great Falls; Gail Gutsche, D-Missoula; and John Vincent, D-Gallatin Gateway, voted for the increase; commissioner Brad Molnar, R-Laurel, and Bill Gallagher, R-Helena, voted against it.

Molnar, whose district includes portions of MDU’s electric service area in Montana, argued that consumers could get a better deal if they paid a market-related price for the power produced by the wind plants, rather than covering MDU’s investment cost at a set price over many years.

He also suggested that MDU asked for an unsupportable high increase and then settled for the increase it wanted, thanks to a pliant Montana Consumer Counsel that capitulated after urging a lesser increase.

“The Consumer Counsel is now backing off their original position and going with the industry simply to end (this),” he said. “I’m having a lot of problems with what MCC is coming up with.”

Kavulla, whose district includes Sidney and Glendive, said Molnar’s suggestion of buying the power at market rates — which Molnar admitted he had come up with on Monday evening — was “being foisted on people as a whim,” and should not be considered.

The Legislature has directed the PSC to encourage utilities to invest in power plants for the long term and allow those investments to be recovered in rates, so consumers can have stable, long-term sources of affordable power, Kavulla said.

“You’re comparing apples and oranges,” Kavulla said of Molnar’s proposal to buy the power back at current market prices. “You’re comparing a spot-market price that exits at the moment. ... It’s fallacious to assume an investment over a 25-year period is the same as relying on the day price at market.”

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