The NorthWestern Energy Building

The Northwestern Energy building at Park and Main in Uptown Butte.

NorthWestern Energy is seeking a $40 million rate increase for the use of its transmission lines, a move with far-reaching consequences for Montana's largest businesses, electric cooperatives and the state's renewable energy future.

NorthWestern said recently it is currently undercollecting on its Montana transmission business by $39.5 million a year. The South Dakota-based utility wants the Federal Energy Regulatory Commission to approve an average 52.8% rate increase to cover costs of some services, plus a host of specialized rates. 

“The way we’ve been able to manage our business over time is that we’ve managed costs across the entire company so that we could avoid a rate filing,” said Mike Cashell, NorthWestern vice president of transmission. We haven’t had a rate filing since 2006 and our revenue requirements have gone up; in 2006 it was $72.3 million, and now the annual revenue requirement is $111.8 million.”

Rate increases on a per-customer basis are substantial.

Talen Energy, which operates Colstrip Power Plant and sells electricity on the open market would face an increase of the nearly $5 million a year under the proposal. Two years ago the company put Colstrip’s five other utility owners on notice that it was losing millions at the power plant, which it no longer wanted to operate. The Pennsylvania-based company eventually chose to stay, but its challenges as a wholesale energy merchant persist as cheap natural gas and renewable energy prices undercut the price of coal power. The added transmission cost will make Colstrip energy more expensive for Talen to deliver.

“Although Talen is still reviewing the Northwestern FERC rate filing, we are very concerned about the rate increase proposed by NorthWestern and we are evaluating the matter,” said Taryne Williams, a Talen spokesperson.

REC Silicon, a major employer in the Butte area, would see its rates increase more than $1.5 million. Attempts to communicate with REC over three days failed to produce a response, but the company last week revealed that it had reduced production earlier in this year because of high energy costs. In Butte, REC makes silicon gas for electronics production. It told the Montana Standard that the Butte facility was still profitable despite the slowdown. 

REC also announced plans last week to halt production at its Moses Lake, Washington, factory. The company said the U.S.-China trade dispute was behind the stoppage in Moses Lake, where REC manufactures polysilicon for solar panels.

A half dozen renewable energy businesses have filed with the Federal Energy Regulatory Commission to intervene in the NorthWestern Energy transmission rate case. Several renewable energy companies have plans for Montana projects assuming they can competitively export power to customers in the Pacific Northwest.

Those renewable energy plans hinge on two things, the first being room opening up on the large transmission lines connecting southeast Montana’s Colstrip Power Plant to Oregon and Washington markets. Colstrip’s two oldest units are scheduled to close in less than four years. Renewable energy companies would like to fill the void with solar and wind energy.

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Puget Sound Energy, a Colstrip owner and major consumer of Montana coal power, has short-listed several Montana projects as renewable energy sources in the future, but the prices will have to be competitive.

Cashell said NorthWestern’s transmission rate proposal would increase the cost of renewable energy crossing NorthWestern’s lines by about $2.30 per megawatt hour for a $22 per megawatt hour project.

That $2.30 difference is an amount the utilities negotiating purchase power agreements may be willing to walk away from. Changes of a few dollars in prices have been a difference maker in contracts for renewable energy in several recent utility proceedings in the Pacific Northwest, including Montana.

The transmission charges are what Cashell calls “postage stamp rates,” meaning the rate is the same no matter the distance on NorthWestern’s lines. In some cases power from generator to customer might occur entirely on NorthWestern infrastructure. In other cases, a generator might course through a NorthWestern substation before traveling a short distance to the Colstrip line, which is owned by several utilities.

NorthWestern argues that it has invested $416 million in its transmission facilities during the past 13 years and that those costs aren’t being fully recovered under its current billing scheme.

NorthWestern deserves to be compensated for its investment, said Doug Hardy, CEO of Central Montana Electric Cooperative. Its customers have the right to scrutinize NorthWestern’s reasoning behind the increase, to make sure the rate adjustment is reasonable. The customers of Montana’s electric cooperatives will see in their bills, some more than others, whatever transmission rate increase FERC allows NorthWestern.

“We’re not saying, ‘We don’t want an increase, so don’t do it,’” Hardy said. “We’re saying we understand there are places where an increase is warranted, but we’re going to work hard with them, or if necessary with FERC, to make sure the cost is minimal for our customers and still delivers a fair return to NorthWestern Energy.”

Central Montana Electric Co-op is owned by eight distribution cooperatives, including Yellowstone Valley Electric. Its costs relative to NorthWestern’s transmission rate case are represented as belonging to Basin Electric, which would see a roughly $6 million increase.

The transmission rate case before FERC is beginning as NorthWestern approaches the end of a general rate case for its captive Montana customers. In the general rate case, NorthWestern seeks a $6.5 million rate increase under settlement terms.

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