As one of your state representatives, I need to let you know about dangerous legislation making its way through the state Capitol. SB331 will allow Northwestern Energy to make a bad deal and then stick it to the ratepayers for hundreds of millions of dollars. What really sets my hair on fire with the situation is that this isn’t the first time Northwestern Energy has bilked ratepayers through a lousy deal. It’s not even their first bad deal over Colstrip! There’s a history of this behavior.
When Northwestern Energy purchased a 30% share in Colstrip 4, it paid about $187 million. When they went before the PSC, they claimed $407 to be the amount which ratepayers should reimburse them. Again, the actual cost to the company was $187 million but the amount which ratepayers must pay the company back for the purchase is $407 million.
The company justifies its actions by saying that the deal was perfectly legal because the PSC approved it. The PSC gave them extra money based on a bid another company quoted them for Colstrip 4. That is a highly unusual way to value a purchased asset, but was explained away by commissioners as justified because NWE was assuming a risk in purchasing the plant.
NWE shouldn’t have done that and the PSC shouldn’t have allowed it. To quote Shakespeare, “A pox on both your houses.” It also bears mentioning that one of the PSC commissioners weighing in on that decision became a NWE executive when he left office. That was also legal, but not right. Move on folks, Nothing to see here.
These boondoggles seem to be part of a pattern. In 2014, Northwestern Energy purchased the hydroelectric dams from a company called PPL and paid a price about $270 million over their actual value. The “extra” valuation of $270 million was justified as “cost of carbon” premium. Never mind that we don’t tax carbon. The company doesn’t mind since it is it is being paid real dollars for that imaginary carbon tax valuation. Oh, we’re paying about a 10% “return on equity” payment on it every year.
SB331 is the latest train wreck to come down the Northwestern Energy track. SB331 is written to allow Northwestern Energy to take over a larger portion of the Colstrip coal-fired power plant for the grand total of one dollar. Why would the current owners agree to such a deal? It’s because Colstrip is in trouble and now is a good time for the current majority owners to jump ship. Their supplier of coal for the plant is in bankruptcy and although their mine may remain open for another year or more, Colstrip will have to pay loads of cash to revamp for a different type of coal if they change supplier. By the way, should they buy their coal from Wyoming like they want to, the state will lose a lot of tax revenue.
So why would Northwestern want to take on an expensive lemon like Colstrip? SB331 guarantees NWE a full return on the value of the plant, amortized over 30 years, regardless of when they close it. Moreover, ongoing costs for the new ownership portion would be passed directly on to customer bills, with no PSC oversight or prudence review. Only after they exceed $75 million in costs over a five-year period, will the PSC be able to step in and disallow some costs.
Bad bills like this pass because Northwestern Energy is very good at pitting factions against each other. They are also very good at raising a cloud of legal smoke to hide their actions and intent. When SB331 passes, risks and the costs will once again devolve to Northwestern Energy customers. We will lose again. Contact your legislators and let them know that you’re concerned.