Montana residents who receive natural gas from NorthWestern energy can expect to pay more this year, handing the utility a combined annual rate increase of $5.1 million.
The Montana Public Service Commission approved the increase on Thursday, concluding that rate payers should help cover the costs associated with NorthWestern’s acquisition of several natural gas fields in northern Montana.
“These assets were acquired based on overly optimistic estimates about the price of natural gas in the future,” said Vice-chairman Travis Kavulla, R-Great Falls. “Those forecasts turned out to be wrong and now consumers are on the hook for the difference.”
NorthWestern initially requested an annual increase of $10.9 million for its natural gas delivery and production services, marking a 6.8 percent change.
Under the agreement reached by the PSC, the company will receive an annual rate increase of $5.1 million.
The average bill for a residential customer using 100 therms each month will increase around $2, or 2.4 percent. NorthWestern serves 189,400 natural gas customers in 117 Montana communities.
“The settlement before us was mostly good, but we discovered a few problems that needed our attention,” said Commissioner Roger Koopman, R-Bozeman. “This commission never feels obligated to approve a settlement, particularly when there is a potential harm to the consumer that we can fix.”
The rate increase is expected to take effect on Sept. 1.
NorthWestern acquired the Bear Paw gas production fields 2012 and 2013. It also acquired a separate gas field known as Battle Creek in 2010.
At the time of the acquisitions, the PSC established interim rates to allow NorthWestern to recover the fixed costs of the purchase, pending a more thorough examination by the commission.
While several commissioners feared that consumers were overpaying for gas produced by NorthWestern, they agreed that not allowing NorthWestern to recover the cost of the facilities would be overly punitive to the utility.
“At the time, these facilities looked like a good deal for customers,” said Commissioner Bob Lake, R-Hamilton. “NorthWestern made a good faith investment and pulling the rug out from under them now simply wouldn’t be fair.”