The backburner issue simmering for weeks about the potential closure of Units 1 and 2 of the Colstrip power plant was how the oil refineries, silicon plants and mining companies that buy electricity directly from those units would be affected.
Those industry buyers, known in utility jargon as “large customers,” began hinting a few weeks ago of job losses and rising consumer prices for things like gasoline if cheap Colstrip power from Units 1 and 2 went away.
Those two units, the oldest and dirtiest in the four-unit Colstrip power complex, face serious challenges. Actions by the two units’ current owners, Talen Energy and Puget Sound Energy, suggest both want out. Those concerns cap several months of worry about several hundred jobs that would be lost in Colstrip if the two units closed.
So when Montana Public Service Commissioner Travis Kavulla had the chance Thursday to put the CEO of NorthWestern Energy, the state’s largest utility, in the hot seat about whether it would intervene, maybe take the reins currently held by Talen and keep the coal units burning for “large customers,” Kavulla took it.
“Do you see at the moment any possibility for a deal to be done where NorthWestern, or another utility, takes those units and has some kind of arrangement to sell that production, either in a regulated manner, or an unregulated manner to wholesale customers like the refineries?” asked Kavulla, whose commission regulates Montana utilities.
The response from NorthWestern’s Bob Rowe, was not exactly a yes, but it did give credence to the suggestions by state legislators that a plan to intervene in Units 1 and 2 was possible. The exchange came Thursday during the final day of the Montana Energy conference in Billings.
“It’s certainly possible, given strategies the state could pursue if the industrial customers taking power were supporting it, Legislature were supporting it, the commission were supporting it," Rowe said. “There are strategies that would allow a party, that could be us, could be someone else, to step into the role that Talen now plays. But it is very inconsistent with the risk profile that we have and we think our customers want us to have. There are lots of risks that would have to be addressed.”
Rowe prefaced his comments by saying that NorthWestern would have “great discomfort being merchants.” Merchant providers of electricity, like Talen, are not regulated and can only sell power at prices the market will bear, which makes it difficult to pass on the costs of things like pollution controls or cleanup for environmental messes. And there is a sizable environmental mess in Colstrip’s leaking ash ponds, which is estimated will cost millions to clean up.
NorthWestern is Montana’s largest regulated utility, which means by law it’s guaranteed a certain level of profit and that its business costs can be passed on to its customers as long as the burden isn’t excessive. The power NorthWestern generates, from hydroelectric dams, natural gas, windmill contracts and a share of Colstrip Units 3 and 4 are solely for its customers within Montana’s regulated framework.
It cannot make acquisitions that aren’t in the interest of its regulated customers and expect them to share the cost. NorthWestern doesn’t need the units for its own purposes. In fact, when Talen offered to sell the units to NorthWestern earlier, NorthWestern declined.
In January, Rep. Kerry White, R-Bozeman, suggested that the state buy Colstrip, but the conversation didn’t go far. Last week, Sen. Duane Ankney, R-Colstrip, suggested to The Gazette that there were too many jobs at the businesses buying power from Colstrip to not do something to keep the power flowing. He suggested NorthWestern might have a role.
The concerns from Montana’s oil refineries, three of which are in the Billings area, surfaced March 21, as U.S. Sen. Steve Daines, R-Mont., toured the CHS refinery in Laurel.
The electricity bill at CHS is roughly $20 million a year, more than CHS spends on payroll, said Pat Kimmet, refinery manager. Roughly 60 percent of that power comes from Colstrip, and CHS will be increasing its power consumption as it expands.
The conversation with Daines served as a scene setter for the three-day Montana Energy Summit this week in Billings, which is where Kavulla put Rowe on the hot seat. It also highlighted industry concerns about the federal Clean Power Plan, which calls on Montana to cut its greenhouse gas pollution by 47 percent by 2035.
NorthWestern paid the University of Montana’s Bureau of Business and Economic Research to study the Clean Power Plan's impacts on Colstrip. That study, whose conclusions were heavily criticized by other economists, predicted that 7,000 Montana jobs would be lost if Colstrip shut down and that $690 million a year in income and taxes would be lost.
Mulling Rowe’s nuanced response about replacing Talen at Colstrip, Kavulla smiled and attempted to paraphrase.
“So, thanks, but no thanks. Keep the door open,” the commissioner said.