Judge: NWE not required to seek shareholder input on Colstrip energy use

A federal judge has denied a shareholder’s request to allow NorthWestern Energy investors to vote against coal-fired energy.

On Tuesday, Missoula federal judge Dana Christensen issued his ruling that NorthWestern Energy had a stronger argument in the case so the utility doesn’t have to send investors information on whether or not to eliminate energy from Colstrip within the next five years.

Last fall, attorney and NorthWestern Energy shareholder Thomas Tosdal wanted to add a referendum to the proxy votes at the annual shareholders’ meeting that would require the utility to pull out of Colstrip within five years if a majority of shareholders voted yes.

Christensen agreed with NorthWestern Energy attorney J. David Jackson that the decision to use coal-generated power from Colstrip along with hydropower and other power sources was what the Securities and Exchange Commission defined as “ordinary business” and therefore, investors didn’t need to be consulted.

Also, the procedures necessary to wean the utility off of Colstrip’s power would also constitute day-to-day operations. Therefore, under SEC rules, NorthWestern Energy wasn’t required to put Tosdal’s proposal to a vote.

“The subject matter of the Proposal is its ultimate consequence,” Christensen wrote. “Here, the Proposal’s ultimate consequence is a potential change in how NorthWestern plans to provide and provides energy to customers. That is, if the Company adopted the Proposal, it most certainly would shape how NorthWestern goes about resource planning. And, as outlined already, resource planning lies at the core of NorthWestern’s ordinary business operations.”

During oral arguments on Thursday, Tosdal told Christensen that the ramifications of climate change brought on by burning fossil fuels allowed his proposal to transcend day-to-day operations. The SEC rules said transcendent issues could be put out to investors.

But Christensen didn’t think that Tosdal’s proposal hit the mark of transcending day-to-day operations.

Christensen pointed to an affidavit provided by NorthWestern vice president of energy John Hines, which emphasized the large capacity of Colstrip, which is used to augment renewable energy sources, although most of NorthWestern’s renewable energy is hydropower.

Hines testified that early retirement of “low-cost, baseload resources like Colstrip are not in the best economic interests of its customers.”

“Here, the Court finds that, rather than disengaging from NorthWestern’s core business, the Proposal enmeshes itself in it,” Christensen wrote.

“The Court appreciates that Tosdal performs a valuable service by creating climate awareness, but in this instance, he is not well-positioned to opine on the basic planning choices made by NorthWestern’s management.”

Christensen ended by providing some guidance should a shareholder want to propose another referendum for a proxy vote at the annual shareholders’ meeting. One of the issues of Tosdal’s proposal focused on eliminating fossil fuel energy from Colstrip but not from NorthWestern’s coal-fired energy plants in the Dakotas or natural gas plants.

“For a policy issue to transcend the Company’s ordinary business operations, it must focus on something larger than shutting down a specific plant by a specified target date,” Christensen wrote.

Members of 350Montana attended Thursday’s hearing and were hoping the judge would rule in Tosdal’s favor. On Wednesday, 350Montana spokesman Jeffrey Smith voiced his disappointment with the ruling.

“Judge Christensen is being very cautious, hyper-conservative, and he’s not doing our children and grandchildren, who will inherit a much warmer, more fragile world, any favors,” Smith said in an email. “He obviously understood the choice to be made: whether to accept NorthWestern Energy’s well-paid lawyers’ excuses – ‘Woe is me. It’s too hard to stop our greenhouse gas pollution! Let’s wait for some sort of phony ‘clean coal’ technology!’ – or to accept the imperative put forth by a courageous stockholder, Tom Tosdal, who said it’s high time business as usual came to a stop, the science that says our planet is rapidly warming and is in deep trouble, and NorthWestern Energy is criminal – at this critical moment – for accelerating its use of fossil coal.”

Tosdal has run out of time, even if he wants to appeal Christensen’s ruling. The judge set an accelerated filing schedule because investor proxies need to be mailed by March 6 to be returned in time for the annual meeting. So an appeals court wouldn’t have time to issue an injunction before then.

Coincidentally, Tosdal’s argument might have been aided by a report released just last week while Christensen was hearing the arguments. The report said NorthWestern Energy’s resource management plan – which Christensen cited as day-to-day operations – is unnecessarily slanted toward fossil-fuel energy without adequate consideration of more affordable options.

The report commissioned from Synapse Energy Economics by the Montana Public Service Commission found faulty assumptions in the company’s computer modeling undervalued renewable resources or buying energy on the open market, so fossil fuel energy, such as that from Colstrip, ended up being the best answer.

Contact reporter Laura Lundquist at lundquist@missoulacurrent.com