Climate scientist: NW Energy’s incomplete planning hurting customers, investors
Keila Szpaller
(Daily Montanan) The electric bill for residential customers would be even higher — 28% — than earlier stated at a utility hearing if the Montana Public Service Commission approves a settlement agreement in the rate case, according to a new exhibit Wednesday.
The hearing on NorthWestern Energy’s rate case is underway this week before the Public Service Commission.
The new exhibit was a calculation presented on the second day of the hearing on the power utility’s request for more money, a hike that’s been characterized as “unprecedented” and “frustrating.”
The new estimate in the exhibit said in August 2022, residential customers paid $91.27 for their electric bill, and if the PSC approves a settlement that’s part of the case, they would pay $116.63, a 27.7% increase.
Throughout the day of testimony before the Public Service Commission, lawyers asked witnesses questions to put costs and a proposed settlement in different contexts.
Members of the public — and a climate scientist who shared in a Nobel Peace Prize — said NorthWestern isn’t taking climate change into consideration. And commissioners quizzed witnesses about impacts to consumers and climate science.
In August 2022, NorthWestern Energy submitted its application to the Public Service Commission, which regulates monopoly utilities in the state.
The PSC is hearing testimony this week on the application and a settlement negotiated among some — but not all — parties.
The Montana Consumer Counsel, which is charged with representing customers before the regulatory body, signed onto the settlement. Other signers are NorthWestern Energy, Walmart, the Montana Large Customer Group including Exxon, and Malmstrom Air Force Base.
Wednesday, lawyer Monica Tranel questioned a Consumer Counsel witness about the total increase NorthWestern wants, some $150 million in electric rates, natural gas and other costs, she said, and the witness confirmed.
“Have you ever seen a rate increase of that size and scope and magnitude in Montana before?” asked Tranel, representing 350 Montana.
“I can’t recall one,” said consulting economist David Dismukes, for the Consumer Counsel.
At the hearing, Tranel brought up the new and higher estimated electric rates from NorthWestern Energy.
The exhibit also said at least some residential customers will pay 4% less in natural gas rates, or $65.51 a month if the settlement is approved, instead of the $68.49 they paid in August 2022.
Witnesses didn’t testify about the new estimates in detail Wednesday. Those who took the stand included representatives for the Large Customer Group, Walmart, 350 Montana, and the Montana Consumer Counsel.
Kevin Higgins, an energy consultant, testified on behalf of the Large Customer Group. The Large Customer Group is a signer to the proposed settlement — a “take it or leave it” deal, one lawyer said on the first day of the hearing.
In questioning by Tranel about the negotiated settlement, Higgins admitted his clients were included in two groups, or types of ratepayers, that are both recommended for 0% increases of the $81.9 million jump in electric revenues.
The settlement notes total electric revenue currently is $546.9 million, and if the proposal is approved, the total would be $628.8 million.
A third type of customer Higgins represents is recommended for the same increase as residential customers when it comes to percent – 18.2%, according to the settlement and testimony. The settlement notes the 18.2% is based on the proposed increase from current revenues.
However, under questioning, Higgins admitted that percent meant his clients would be paying just 3.6% of the total $81.9 million increase.
“But they’re also a relatively small share of the total revenue to begin with,” Higgins said.
In her questioning, Tranel noted just a few parties signed onto the settlement, and many parties did not sign it.
But she said the “non-settling parties” are bearing more than 90% of the rate increase, whereas the parties that signed onto the agreement — negotiated privately — are bearing “a very small portion.”
But lawyer Thorvald Nelson, representing the Large Customer Group, shed different light on the agreement in questioning witnesses.
Under questioning from Nelson, energy consultant Justin Bieber said residents would be getting a good deal. Bieber pointed to two cost-of-service studies, which look at the price tag of delivering power to different types of customers.
He said the studies, one from NorthWestern and one from the Large Customer Group, showed the residential customers were being subsidized to the tune of $8 million to $19 million annually by other classes of ratepayers.
Additionally, Bieber said the 0% increase for some Large Customer Group members represents more than the studies estimated it cost to provide them power.
In other words, he said if those ratepayers were paying only their own costs, they would have a decrease, not a flat rate.
However, Bieber also acknowledged subsidies are a typical way regulators set just and reasonable rates.
Under questioning from Jenny Harbine, representing the Montana Environmental Information Center, however, Dismukes confirmed cost-of-service studies can be biased. He confirmed some of those biases can allocate higher costs to smaller customers and “unreasonably low” costs to larger ones.
The only studies in the mix were from two of the settling parties. The Montana Consumer Counsel, which advocates for customers, is also a signer to the settlement proposal, but it did not produce its own study.
Wednesday, Steve Running took the stand on behalf of 350 Montana and testified NorthWestern made a significant omission in its considerations. Running is a professor emeritus at the University of Montana whose work on climate science shared in a Nobel Peace Prize in 2007.
He said when he looks at NorthWestern Energy’s strategic planning, he sees it is paying no attention to a primary variable, which is the changing climate, despite the significant body of work that’s available, globally and specifically to Montana.
“I worked in complex systems analysis myself, and the important thing is you’ve got to have all the variables that matter in front of you. And they don’t,” Running he said.
For example, he said irrigators, one of the types of ratepayers, have to pay attention to evaporation when they irrigate their crops.
The irrigation season is changing in Montana, he said, but NorthWestern Energy isn’t paying attention to how those factors and others influence energy demands and requirements.
“And it’s to all of our detriment as customers and even as investors in the company,” Running said.
A couple of commissioners questioned Running, one about possible bias on the Intergovernmental Panel on Climate Change, the Nobel recipient, and another on the benefits of hydrocarbons.
Commissioner Jennifer Fielder wanted to know if the IPCC is the definitive source on climate change, and Running said its reports make worldwide headlines and the authors are volunteer scientists. Fielder also wanted to know if the IPCC may exclude some scientists because they have “a dissenting opinion.”
Running, one of the participating scientists, said every government proposes a slate of authors, and he wasn’t sure how the selection process proceeded from there. However, he said authors could have a lot of different opinions, and as long as they’re justified by scientific literature, he didn’t think they would be passed over.
“The most important thing with the IPCC authorship is that they have to base their opinions on published research,” Running said.
“That’s interesting. Thank you,” Fielder said.
Commissioner Ann Bukacek asked Running to explain his title as “doctor,” and he said he received a doctorate in forest ecology from Colorado State University. As such, Bukacek, an internal medicine doctor, said she would talk with him “doctor to doctor.”
She noted Germany uses wind and solar power, but it’s had to revert to coal and natural gas in the crisis with Russia. Bukacek wanted to know if Running was aware of that fact.
Bukacek also asked if Running was familiar with the idea that countries such as South Africa and India have brought millions of people out of poverty using hydrocarbon sources of power.
Running said he was aware of the situation in Germany, and Russian’s invasion of Ukraine meant power was running short there. He pointed to China as “Exhibit A” for using energy to advance living conditions for people: “They brought a half a billion people out of poverty.”
In response, Tranel circled back to Running and said she wanted to be sure people had the right impression about whether it’s prudent to rely on hydrocarbons as a source of energy.
Running said he was probably the oldest person in the room, and he used to think Colstrip, home to the state’s coal fired plants, was fine. He himself had a small research project in Colstrip early on in his career.
However, 50 years later, he said people know what’s driving climate change and need to be thinking forward, not backward, when it comes energy sources. And Running said he would expect NorthWestern Energy to be strategically planning ahead.
“We have such a different world than we had 40 years ago when I was out there trying to get pine seedlings to grow at Colstrip,” Running said.