Getting a tax increase through the Montana Legislature usually is an uphill, nearly impossible battle. Yet the Montana Senate's Energy Committee last week rushed to approve legislation that could impose millions of dollars in costs on NorthWestern Energy customers for decades.
Senate Bill 278 proposes to abolish regulations that require NorthWestern Energy to justify costs before they can be added to ratepayers' bills. Further, the bill would let NorthWestern charge its Montana customers for costs related to Colstrip power plants for up to 30 years — after they stop generating electricity. NorthWestern Energy is the only utility that could use SB 278, as approved by the Senate Energy Committee.
In two brief sections, the bill, introduced by Sen. Tom Richmond, R-Billings, takes away the Public Service Commission's authority to protect consumers from imprudent decisions by the utility. The bill takes away the utility's incentive to keep costs down because it would shift all risk to ratepayers.
If you live in Billings, this means you, your home, business and schools. SB 278 says the electric rates "must include the full recovery" of NorthWestern's investment in a coal-fired generating station in Montana. Further, it says that if a coal-fired generating station is retired before it's fully depreciated, the utility's "undepreciated investment ... together with any required decommissioning and site remediation costs" must be included in customer rates for up to 30 years.
Bad as those ideas are, the second section of SB 278 is worse. NorthWestern Energy now owns 30 percent of Colstrip Unit 4. SB278 would allow the utility to acquire a larger ownership share of Colstrip plants "at the nominal transfer price of $1." Such a transaction would cost ratepayers much more than $1 because SB278 says rates "shall be set to allow the full recovery of all costs incurred."
NWE had the opportunity to purchase interest in Colstrip Units 1 and 2 in 2013 when it was negotiating the $900 million purchase of hydroelectric dams from PPL. At the time, NWE leaders refused to take on the liability of those coal-fired units. In 2013, NorthWestern attached a negative value to the Colstrip plants, worried that any buyer eventually would have to shut down the plants and bear the cost of “remediating” the sites.
Back in 1997, the Montana Legislature and Gov. Marc Racicot bowed to the demands of the Montana Power Co. and allowed it to be deregulated with the promise that Montanans would have new choices for power suppliers and that power would be less expensive. At the time of deregulation, MPC customers benefited from some of the lowest power rates in the nation.
The deregulated Montana Power sold its dams and other energy-producing assets and went bankrupt. Montanans wound up paying more for their electricity, including the cost of Montana Power's successor, NWE, buying back the dams.
The proponents of SB 278 say this is an economic development bill. But it would not guarantee that the Colstrip plants keep operating; it simply guarantees that NWE can pass along all its costs of present and future stakes in Colstrip to its Montana customers.
"SB 278 would make NorthWestern Energy’s captive ratepayers the sole guarantors of all future Colstrip costs," Jason Brown, attorney for the Montana Consumer Counsel, told the Energy Committee. "First, SB 278 requires ratepayers to fully fund NWE’s investments in its share of Unit 4, including all stranded costs, decommissioning and remediation amounts without any consideration of prudence and usefulness, which are normal ratemaking standards. Second, SB 278 requires ratepayers to fully fund any increased ownership share, including all costs incurred as a result, such as O&M and future capital expenditures, including all future liabilities, such as decommission and remediation — without any consideration of prudence, usefulness or least-cost planning principles."
Senate Bill 278 is on a fast track. Introduced on Feb. 18, it passed the Energy and Telecommunications Committee just three days later and had a hearing Tuesday in Senate Finance and Claims. We call on Montana's senators to stop this cost shift to NWE's Montana customers. Don't exempt this utility from the rules protecting all of us who pay electric bills. We urge legislators to vote no on SB278.