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In the next few months, Montana’s Public Service Commission will decide whether to approve a rate increase for NorthWestern Energy customers.

The commissioners wrapped up testimony in the case in May as the utility began reaching settlements with third parties contesting the terms of NorthWestern’s case. A summary of the case follows.

Rate increase dialed back 

At the outset, NorthWestern had requested a $34.8 million rate increase from its reported Montana customer base of 370,000. It had received $10 million of that amount as an interim increase approved by the PSC in February.

That request, including the interim rate increase, was dialed back to $6.5 million in May after NorthWestern reached a stipulated settlement with Walmart; the Montana Consumer Counsel; Federal Executive Agencies; and a Montana group of large energy customers, such as Exxon and Stillwater Mining Company. For residential customers, the rate increase would be around 2%.

Solar net metering charges 

There are only about 2,100 NorthWestern customers with solar panels in Montana who “net meter,” but their protests of NorthWestern’s plan to increase their rates dominated public comments.

At issue is whether NorthWestern at current rates does enough business with net metered customers to cover the utility’s fixed costs. NorthWestern wants to impose a demand charge allowing it to bill net-metered customers at a higher rate of $8.64 a kilowatt for the customer’s busiest consumption hour of the month. The rest of the month would be billed at a normal amount.

The proposed rate is high enough that a customer who might pay $35 a month for electricity without a solar panel setup complete with surplus energy flowing back on the grid would pay an additional $52 because of the demand charge, said Dick Walton, a retired physics professor who penciled out the charges for his own house.

NorthWestern is assuring current net-metered customers that they would be grandfathered in. Solar contractors say the demand charge will add years to the time homeowners need to break even on installing solar panels, which will discourage new installations.

Irrigation cost increase

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If there was one group completely unrepresented in NorthWestern’s rate case, it was agriculture. Parties from Walmart to residents worried about street lighting hired expert witnesses and attorneys to argue against the rate increases. Agriculture groups didn’t turn out.

Irrigators face the sharpest increases in existing rates of any class. There’s a 10% rate increase in the demand charge, and a 9.9% increase in the non-demand charge. The amount stands out as the rate for the residential customers gets negotiated down to less than 2%.

Street lights

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Some Billings residents have argued for years that NorthWestern overbills neighborhoods for street lights by continuing to charge for the lights long after they’ve been paid off. Leo and Jeanne Barsanti are the residents at the core of the challenge. Along with counsel Russ Doty, the couple propose a more transparent depreciation of street light debt that clearly shows when the lights are paid off.

NorthWestern argues that Doty and the Barsantis don’t understand deprecation and that the argument about streetlight overbilling should be ignored.

Colstrip Unit 4 debt

Back in 2008, the PSC put NorthWestern Energy customers on a 34-year, $407 million payment plan for the utility’s 30% share of Colstrip Unit 4. The amount reflected the high bid the utility had been offered for the unit share earlier that year.

The price has been long disputed, given that NorthWestern secured ownership in the unit for less than half that amount in 2007. The Montana Consumer Counsel had suggested in 2008 that consumers shouldn’t be saddled with more than $225 million for Colstrip Unit 4.

In the past decade, estimates of the unit’s value have only decreased. Energy economist David Schlissel told the PSC that NorthWestern’s share of Unit 4 is probably only worth $100 million today, not the roughly $300 million in debt customers still carry.

There are also questions about whether the unit will continue to run until 2042, as NorthWestern insists. Four of Colstrip Power Plant’s five owners face deadlines to stop servicing customers with coal power in Washington and Oregon, with three facing deadlines within six years.

Resetting customers’ payment terms for Unit 4 has been a nonstarter for NorthWestern, which insists it will operate Colstrip for another 23 years even as other owners, and their 3.1 million customers, make exit plans.

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