NorthWestern could buy Colstrip plant for $1, pass on costs under bill
(Montana Free Press) A bill generating controversy about the future of the Colstrip power plant had its second Senate committee hearing Tuesday.
Senate Bill 278 essentially does two things. First, it curbs the Public Service Commission’s ability to regulate NorthWestern Energy’s rates, leaving electricity customers on the hook for at least some of the utility’s costs even if the plant closes early. Second, it allows NorthWestern to acquire additional ownership of the coal-fired plant for no more than $1.
The bill sailed through its first hearing in the Senate Energy and Telecommunications Committee on Feb. 21. The Senate referred the bill to the Finance and Claims Committee on Feb. 25, and the committee held a second hearing on the bill Tuesday, which drew only one supporter and several opponents.
“To me, the heart of the bill is [the second] section. What we’re talking about is getting generation for a dollar,” said the bill’s sponsor, Sen. Tom Richmond, R-Billings.
Environmental and consumer advocates disagree. Anne Hedges, the lead lobbyist with the Montana Environmental Information Center, called the second section a “bait and switch.”
“This bill is about section 1 and NorthWestern Energy’s existing ownership of that facility,” Hedges said.
That first section states that for any owner or joint owner of a coal plant in Montana, electricity rates “must include the full recovery of the owner’s investment in the generating station,” including a return on the amount invested. It also says that if a plant closes earlier than expected, the utility is allowed to include its costs and investments in electricity customers’ rates for up to 30 years.
Normally, the Public Service Commission approves or denies ratepayer increases for monopoly utilities like NorthWestern. The commission also weighs whether certain investments are warranted and whether the utility can pass on those costs to customers.
As written, Hedges said, SB 278 could potentially allow NorthWestern to spend millions on unnecessary equipment. She pointed to the $7.5 billion Mississippi Kemper coal plant as an example. Costs ballooned there, in part, due to unsuccessful carbon sequestration technology. The plant abandoned the project in 2017 and the utility’s shareholders had to swallow most of the costs.
Under SB 278, a similar snafu would mean “those costs are required to be passed on to NorthWestern Energy’s 350,000 customers, including the state of Montana, without the regular utility practice of having the Public Service Commission determine whether those investments are in the customers’ best interest,” Hedges said. “That is folly.”
Bob Gilbert, a lobbyist for the city of Colstrip and the only person who spoke in favor of the bill, said he didn’t read SB 278 as allowing NorthWestern to bypass the PSC’s oversight.
“But if indeed the Public Service Commission has no say over their utility rates, may I remind you that in the state of Montana, there are a great number of utilities that provide service to electrical customers without the PSC’s blessing, so to speak,” he said. “That’s our co-ops.”
Numerous small cooperatives provide electricity in Montana, especially in rural areas. Unlike NorthWestern, however, those providers are owned by their customers and governed by boards elected by ratepayers. Monopoly utilities such as NorthWestern are beholden to stockholders and regulated by the PSC.
Gilbert implied that regulatory oversight isn’t always needed for monopoly utilities.
“Good business people succeed whether they’re regulated or not,” he said. “So regulation is not necessarily a thing you have to have, be it telephone companies, be it electrical, be it trucking.”
The Colstrip plant is currently co-owned by multiple utility providers. Some of its largest owners, headquartered in Oregon and Washington, have taken steps to divest themselves of the Colstrip plant as they move toward renewable energy sources.
The Colstrip plant has four generating units co-owned by six companies. Units 1 and 2 must shut down by 2022 as a result of litigation by environmental groups. NorthWestern Energy currently owns 30 percent of Unit 4, a share that generates about 222 megawatts. The utility projects that Unit 4 will be operational until 2042. NorthWestern is the only plant owner that provides power to Montanans.
While few details have emerged about NorthWestern’s plans for the plant should SB 278 pass, Richmond said at the hearing that the utility is interested in purchasing about 150 additional megawatts.
The Senate Finance and Claims Committee adjourned without voting on the bill.