A Little Background
Until the early 2000s Montana Power Company had very low rates and a reliable system. In the mid-1990s they began to promote “deregulation” which allowed them to sell all of their generation facilities. With an intense lobbying effort, and over the objections of consumer advocates, in 1997 the Republican legislature passed a bill which allowed Montana Power to sell. Pennsylvania Power bought the hydro system and the coal plants, while a small South Dakota company, NorthWestern Energy, purchased the lines and wires in Montana. Chaos ensued. Rates climbed rapidly, businesses closed, and Montana ended up paying the highest electric rates in the Northwest.
By 2007 Republicans in the Legislature finally admitted that the “deregulation experiment” was a dismal failure and passed a law allowing Northwestern to own generation assets. Northwestern began buying back the plants that Pennsylvania Power purchased, paying premium prices, which of course, were added to their rates and into our electric bills.
Recently NorthWestern Energy announced several moves that are part of the continuing trend of rebuilding a corporate and regulatory structure that existed before deregulation. Unfortunately, NorthWestern is forgoing the opportunity to remake the utility with modern clean resources, choosing instead to bet the farm on antiquated fossil fuel technology which is both dirty and expensive.
Betting on Dirty, Expensive Coal
Last week NorthWestern announced that it is going to buy out a 370 megawatt share of the Colstrip complex from Puget Sound Energy. NorthWestern says they will get the plant at “no cost.” Of course they don’t mention the plant is in dire need of expensive upgrades which customers will pay for. Nor do they mention that they will be assuming significant liability for environmental clean up and compliance which customers will also pay for. Two and one half years ago, NorthWestern reached a similar deal with Avista for a 222 megawatt share.
NorthWestern and Republican politicians say that coal provides a stable, reliable source of power for Montana. The truth is they are far from stable or reliable. During the cold snap of January 2024, Colstrip went down. In July when the heat wave hit Montana, Colstrip went down again. The truth is these are antiquated plants and keeping them online is both challenging and expensive. Of course ratepayers assume those costs in the end.
The Laurel Gas Plant
Following years of opposition and litigation, a new natural gas plant along the Yellowstone River came online in March. This is a very large (175 megawatts) plant designed to come online to meet periods of peak demand. That means the rest of the time it sits idle, not producing any revenue. The cost of the plant is estimated to be over $250 million which again will go into customer rates and generate a generous rate of return (profit) for NorthWestern stockholders.
Purchasing Energy West
NorthWest Energy announced that it is purchasing Energy West, Great Falls’ local natural gas distribution company for $39 million. The transaction will have to be approved by the Montana Public Service Commission. NorthWestern expects completion of the deal in early 2025. In a press release, NorthWestern said they do not plan on raising customer rates as part of the deal.
Energy West currently has about 33,000 customers in the Great Falls area, Cut Bank and West Yellowstone. It is owned by Hope Utilities of West Virginia. Hope Utilities is a holding company that owns utilities in nine states, including Montana. They have a total of 227,000 customers (which includes a couple of small water and wastewater utilities). NorthWestern has about 212,000 customers in Montana. Energy West rates are currently lower than NorthWestern’s.
NorthWestern Energy Rate Impacts on Customers
All of this buying and building is expensive. . .and it is showing up in our rates. In October of last year, the Republican Public Service Commission approved a 28% increase to residential customer rates (large customers did not have as large an increase). Last month NorthWestern said it is filing another request with the Public Service Commission to increase rates. This time around they are proposing to increase rates by another $21.9 million or 8.28%. In this case, Northwestern is proposing a “balancing account” which allows them to collect money from ratepayers for expenses which have not been incurred yet. Estimates of those expenses run as high as $2 billion (that’s with a B).
How All Of This Makes Money for NorthWestern Energy
Utilities make money in two ways. First is by increasing sales or customer base which gives them an incentive to purchase Energy West. The other is by making capital investments like building and upgrading plants. Once accepted by the PSC, the utility receives a guaranteed “rate of return” of somewhere around 10% for the life of the plant.
And speaking of making money, here are the top three NorthWestern executive salaries per year reported at the end of 2022.
Bob Rowe, CEO (Retired at the end of 2022) $3,375,572
Brian Bird,COO (Replaced Bob Rowe) $2,674,811
Heather Graham, Chief Legal counsel $1,264,471
Thank you to The Daily Montanan, Montana Free Press and The Electric for their reporting on these issues.