NorthWestern says PSC can’t regulate new Colstrip shares
Keila Szpaller
(Daily Montanan) NorthWestern Energy said a portion of the new Colstrip shares it will acquire on Jan. 1, 2026, will be transferred to a new subsidiary — one the utility said is not under the authority of the Public Service Commission.
In a recent letter to regulators, NorthWestern Energy also said the deal does not require approval by the Public Service Commission.
NorthWestern sent the letter in response to questions from the Public Service Commission about an October filing the utility made with the Federal Energy Regulatory Commission about the new shares.
In the filing, the subsidiary, called NorthWestern Colstrip 370 Pu LLC, requests federal approval for selling electricity on its own as a separate and “unregulated” entity.
The filing has raised questions from not only the Public Service Commission — charged with regulating monopoly utilities in the state — but also a Montana energy watchdog.
For starters, does the filing leapfrog a critical step?
Does the transfer of assets from a regulated utility — whether Puget Sound Energy or NorthWestern — to a NorthWestern holding company subsidiary require federal and state regulatory approvals?
And either way, what does it mean for existing customers?
In a unanimous decision Friday, the Public Service Commission voted to hire outside counsel to intervene in the docket, and in subsequent motions on Monday, it revised the deal to spend as much as $25,000 on the intervention.
“The Commission felt it was important to intervene because we have deep concerns about whether the actions of NorthWestern Energy were in the public interest and what the impacts to customer bills will be based on these decisions they’ve made,” said Public Service Commission spokesperson Alana Lake.
Acquiring more Colstrip shares
In the last couple of years, NorthWestern Energy announced two deals to acquire additional shares of the coal-fired plant at Colstrip, taking its ownership from 15% to 55% of the plant as of Jan. 1, 2026.
NorthWestern announced the price tag for the acquisitions at Colstrip units 3 and 4 to be zero dollars, even as other companies back away from coal, facing state restrictions on carbon emissions and steep upkeep for old plants. (Units 1 and 2 were shuttered in 2020.)
NorthWestern Energy announced in July 2024 it would acquire Puget Sound Energy’s 370 megawatts of the Colstrip Plant.
The utility said that acquisition, coupled with a previously announced deal to acquire Avista’s 222 megawatts, would ensure Montana customers have “cost-effective generation” available during a transition to a “cleaner energy future.”
NorthWestern said the acquisition of the Puget shares would provide a benefit to existing customers starting on Jan. 1, 2026.
But in its letter to the Public Service Commission, NorthWestern described a different plan for the Puget shares. It said its subsidiary, NorthWestern Colstrip 370 Pu LLC, intends to sell the energy on the wholesale market under federal jurisdiction until NorthWestern customers need the capacity.
“To that end, Colstrip 370Pu entered into a 21-month contract with Mercuria Energy America, LLC, for the sale of all the output of the Puget Share,” NorthWestern said in its letter.
Bloomberg describes Mercuria as an energy and commodity trading company.
Separate from this case, but at the fore in Montana, is significant demand from data centers on the near horizon, a controversial issue that’s unfolding in communities and at the Public Service Commission.
NorthWestern acknowledged it included the Puget shares in its own capacity forecasts, but also said analyses, both before and after the announced acquisition, show it could meet its energy obligations without those shares.
So setting the asset aside is a benefit to customers, NorthWestern said.
“Holding the Puget Share outside the Montana Utility (NorthWestern Energy) relieves customers of responsibility for any costs or liabilities associated with the asset prior to it being required to meet utility load, while allowing the company an opportunity to offset O&M (operations and maintenance) costs through wholesale sales,” NorthWestern said.
Is it indeed a good deal for existing customers, as the utility said?
Anne Hedges, head of the Montana Environmental Information Center and one of NorthWestern’s outspoken critics, said other utilities have created similar setups, and the deal isn’t unusual.
But NorthWestern submitted the proposal to the feds just last month, and with the shares set to transfer come 2026, there’s little time to tell how customers will be affected.
“This deserves a whole lot more attention than NorthWestern is allowing, and that is what is so frustrating,” Hedges said.
Energy conservation group moves to intervene
Problems already are apparent in the filing in the federal case, however, said the Montana Environmental Information Center, a nonprofit and conservation watchdog, in its request to participate in the federal case.
For one thing, the nonprofit argues the subsidiary doesn’t show it secured federal authorization for the planned transfers in the first place.
In the absence of that authorization — or, alternatively, an explanation for why one isn’t necessary — the subsidiary’s filing to get approval for selling energy wholesale is “fatal,” the nonprofit argues.
Secondly, in the filing, the NorthWestern subsidiary has not shown existing customers aren’t getting shorted, the Montana Environmental Information Center argued.
The subsidiary’s filing is a request for a pricing structure for the plan to sell energy on the wholesale market. But the nonprofit said evidence suggests existing customers are getting a raw deal compared to anyone who might benefit from the wholesale sales.
For example, the maintenance costs the subsidiary provides in the filing are historical ones, lower than future projected costs, the nonprofit said. Additionally, it said, a new fuel agreement increases those costs at Colstrip as of Jan. 1, 2026.
In other words, the NorthWestern subsidiary “significantly underestimates” actual maintenance and operations costs, the nonprofit said. And it said the subsidiary itself describes its pricing structure as representing “ceiling rates,” meaning actual rates paid by wholesale customers could be lower.
“This means that NorthWestern’s retail customers will likely pay more than the affiliate’s wholesale customers for Colstrip-generated power, and risk being charged the affiliate’s unrecovered costs to maintain and operate the plants,” the nonprofit said.
Citing a statement by NorthWestern Energy, it also said the utility appears to have transferred transmission capacity to the new subsidiary “on terms that may reflect a subsidy by the utility’s retail customers.”
(In the meantime, NorthWestern continues to argue its transmission infrastructure is “severely constrained” and requires additional capital for reliable service, the nonprofit said.)
Hegdes said the cost of operations and maintenance for the Puget shares might be close to $25 million. NorthWestern earlier said the Avista shares would cost $18 million in operations and maintenance, and it asked to temporarily tap a customer credit to pay.
To ensure existing customers aren’t picking up the tab for costs that aren’t theirs, Hedges said state and federal regulators need data from NorthWestern, evidence of firewalls, and time for a rigorous assessment.
Instead, she said NorthWestern is offering a “shell game” and short shrifting the federal review process.
“We need transparency to show that NorthWestern and its market customers are the ones who are going to be shouldering those costs,” Hedges said.
Public Service Commission ponies up to intervene
In a Nov. 5 letter, the Public Service Commission asked NorthWestern Energy questions about the federal filing and pointed out its own role in overseeing utilities.
“The Commission has consistently exercised authority over mergers, sales, and transfers of utilities and utility property,” the letter said. But it said “it appears that NorthWestern Energy intends to transfer property that it has characterized as utility property.”
The letter asked NorthWestern to clarify whether it would seek approval from the Public Service Commission, and it asked for a “comprehensive explanation” if the answer was no.
In its response, NorthWestern Energy said it doesn’t own the Puget shares nor is it acquiring them “at this time,” and a separate “non-utility subsidiary” will acquire them on Jan. 1, 2026, so there’s “no basis” for the Public Service Commission to assert jurisdiction.
“Neither the Puget Share nor the Puget Agreement (the contract to acquire the Puget shares) has ever been used to serve Montana customers, placed in rate base, or recovered through Montana rates,” NorthWestern said. “The transfer of ownership will occur directly between Puget Sound Energy and Colstrip 370Pu, which is not a regulated public utility.”
But Lake, executive director for the Public Service Commission, said the Commission continues to have questions about the deal, including whether NorthWestern’s assertion the Puget shares transaction isn’t subject to state regulatory authority has merit.
Lake said she expects the Commission also will open a docket to investigate that question. For the time being, however, she said the priority is to ensure the Public Service Commission is able to intervene in the federal case given the risk the deal poses to customers.
The Public Service Commission is seeking late-intervener status in the case.
In one of its filings, the NorthWestern subsidiary explains why the call for federal approval of the transfer should be rejected. In part, it asserts the transfer of shares isn’t relevant to its pending request — for a wholesale pricing structure — and the amount of money at stake doesn’t hit the threshold for approval anyway.
Friday, Mike Green, a NorthWestern official, apologized to commissioners for not keeping them better apprised of its plans with the Colstrip plant.
“We’ve had some discussion about whether or not we should have come to the commission and sought your approval,” Green said at the meeting. “I will submit to you, we probably should have told you what we were doing, but I will also respectfully submit we didn’t need to, and there was no basis for us to ask for approval.”