Montana utility regulators and NorthWestern Energy failed to follow state law requiring the development of community renewable energy projects, the state Supreme Court has ruled.
For years, Montana’s Public Service Commission gave NorthWestern a pass for not building or buying community renewable energy projects for its generation lineup. At one point, the PSC granted waivers to NorthWestern five years running.
The Clearwater wind project near Circle, Montana has a capacity of 750 megawatts.
Tuesday, the Montana Supreme Court faulted the PSC for not enforcing the law, including one year when commissioners indicated they were doing so to “send a message” to the Legislature about the law that had been on the books for about a decade. Commissioners will now have to revisit a waiver granted to NorthWestern for 2016 and determine whether the company was compliant with its legal obligation for that year.
The lawsuit was brought by the Montana Environmental Information Center.
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CREPs, as the renewable energy projects are known, stemmed from a 2005 Montana law that required the state’s two monopoly electric utilities to incorporate a combined 75 megawatts of capacity from projects typically built by a third party with a lot of community ownership. On average, a 75-MW wind farm would generate enough electricity to power slightly more than 26,000 Montana homes for a year.
The state’s largest monopoly, NorthWestern, with 400,000 metered electric customers shouldered a 65.4-megawatt capacity share of the obligation. Montana Dakota Utilities, with 26,000 electric meters spinning in Montana, was obligated for the other 9.6 megawatts.
A pickup truck is dwarfed by wind turbines at NextEra Energy Resources Clearwater Wind Project between Miles City and Jordan.
In this ruling, the court laid out a scenario in which NorthWestern once a year issued a request for proposals, or RFP, for community renewable energy projects, but with requirements that no developer was likely to meet, namely that the proposed projects be completed in 18 months. The following year, the process would start over.
“In its 2015 RFP, NorthWestern unreasonably required projects to be operational by the end of year, while it had previously acknowledged that no CREP project has ever been newly constructed in less than two years,” the court said. “The record demonstrates that NorthWestern’s determination to set a short time frame for project completion was unreasonable as it needlessly inhibited NorthWestern from examining longer term opportunities to obtain future CREP compliance.”
With no community renewable energy projects able to meet the one year start to finish scenario, the utility would then petition the PSC to waive the CREP mandate, which regulators reliably did.
There were commissioners uncomfortable with flouting the law. In 2018, Commissioner Travis Kavulla noted that “the law does require the commission to consider whether a utility has taken all reasonable steps within its control and if we find they have not, the commission shall impose a penalty.”
Kavulla said NorthWestern’s time from bid to finished product wasn’t long enough. He suggested that instead of starting over, the utility select a project from the previous year that hadn’t met the deadline. NorthWestern also could have complied by building its own project.
The law, as Kavulla observed, said the PSC “shall impose a penalty” if a utility is hasn’t complied with the CREP law. That penalty is at play in the Supreme Court’s decision.
A lower court had determined NorthWestern was noncompliant with the law and fined the company $2.5 million. But the Supreme Court ruled that the compliance issue, and the penalty had to be determined by the PSC, specifically for 2016.
As the PSC consistently issued waivers to NorthWestern, state legislators attempted to amend the CREP requirement out of the law by repealing the renewable portfolio standard, in 2015, 2017, and finally 2021 when a Republican majority repealed the renewable standard on a party line vote.
In the 2021 repeal bill, sponsored by Rep. Jerry Schillinger, R-Circle, lawmakers attempted to exempt utilities from the CREP requirement retroactively. However, the High Court ruled the 2021 repeal didn’t exempt utilities for years NorthWestern and the PSC were being sued.
