PSC to investigate NorthWestern Energy’s cold spell response

Blair Miller

(Daily Montanan) The Montana Public Service Commission voted unanimously Tuesday to investigate how NorthWestern Energy and another utility planned and handled power generation and costs during the record cold snap that hit Montana earlier this month.

Stemming from the PSC’s 2022 investigation into resource adequacy and electrical supply risks in Montana, as well as criticism over NorthWestern’s handling of the spell that brought below-zero temperatures to most of Montana for several days this month, commissioners voted to send letters to NorthWestern Energy and the Montana-Dakota Utilities Company asking a series of questions about the choices the companies made to power Montana when usage spiked.

Since the PSC was authorized in 2022 to “investigate and identify the size and scope of the issues facing Montana and the Western Region,” staff recommended the commission now take a detailed look at the performance of both companies’ energy systems during the latest Arctic cold period.

Temperatures dropped below freezing on Jan. 10 and did not reach above-freezing levels again until Jan. 21 in Helena. Low temperatures bottomed out at -36 there but remained in the -35-to–5-degree range for several days between Jan. 12 and 15, which NorthWestern said created a record demand that outpaced the previous record set in December 2022, when a similar stretch of frigid air moved through Montana.

The company said it had to import energy from out of state to supply more than half of customers’ demand during that stretch, which cost upwards of $14 million. In the days after the energy demand peaked, the company said it could have avoided millions of dollars in total purchases if it was currently operating two other plants. Energy market purchases by the company are passed through to customers’ bills.

NorthWestern said operating the under-scrutiny Yellowstone County Generating Station, a 175-megawatt natural gas plant near Laurel, could have saved $14 million, and Avista’s 222-megawatt share of Colstrip, which the company is set to acquire on Jan. 1, 2026, could have saved $18 million in buys from the energy market.

NorthWestern also said its natural gas system supplied a record amount of natural gas to keep the grid active.

“NorthWestern Energy’s Montana natural gas-fired generation facilities and the Montana Colstrip power plant, along with our hydro generation in Montana, supplied about half of the power for our customers during the extreme temperatures,” the company said on Jan. 17. “Wind and solar generation could not produce much, if any, power during the extreme cold. Energy market purchase, most imported from out-of-state, were made to meet more than half of our Montana customers’ energy demand.”

NorthWestern Energy CEO Brian Bird said the cold snap showed why Montana needs “additional 24/7, on-demand resources” both to meet demands and “to add even more variable wind and solar generation to the Montana grid.”

But some have been critical of the fact that Colstrip Unit 4 was down for scheduled maintenance at the start of the cold period, ramping up production on Jan. 13 when temperatures were at their lowest, and that the company hasn’t invested in more battery storage to capture the wind energy generated when cold fronts move through ahead of storms.

The Billings Gazette also reported that the company did not buy much, if any, power ahead of the storm in order to curb the financial hit to its nearly 400,000 customers in Montana despite having the power to do so.

PSC staff told the commissioners that the first step in the review of the companies’ response to the January 2024 cold snap was to send both companies letters asking them to answer a series of questions about their systems, the choices they made to buy power and keep the systems running, and how much money those choices cost consumers or brought into the company.

The letter also asks the company to answer whether the Western Power Pool, a consortium of Western energy companies, initiated any sharing and whether NorthWestern received or provided any capacity or energy under the Western Resource Adequacy Program.

And finally, the commission asked the company to further explain what maintenance was performed at Colstrip that left it out of service during the initial days of the cold snap, when Colstrip decided maintenance was needed, NorthWestern’s involvement in the decision-making process for the maintenance, and whether it is normal for maintenance to occur in the months where there is the most demand for energy.

The company will have to respond with the information in a spreadsheet by Feb. 13. Commissioners will also send a similar letter to the Montana-Dakota Utility Company.

District 2 Commissioner Tony O’Donnell said he believed getting the information from NorthWestern Energy would help the regulators better understand how the utilities could improve the next time an Arctic blast hits Montana and the Western region.

“I think that the letter is really important to investigate more questions, tools, and how they were used, how the market responded, how the RAP program responded to this. It’s a very good case study,” he said.

O’Donnell said he was concerned what a regional cold front could do if all Western utilities struggled to output the demand from customers, and what would happen if any production sites experience any outages, like the one that happened in Washington during the last cold front. He proposed the commissioners add another question about NorthWestern’s assessment of liquidity in the wholesale energy market, which was adopted in a 3-2 vote.

“I think this is important to understand, get a good picture of all the resources that are available to NorthWestern and the co-ops and therefore directly related to keeping the people of Montana from freezing to death,” he said. “… I’m certain that this would not be a burden for NorthWestern; I’m certain that they are keeping a very good eye on everything that is available to them at different circumstances.”

He went on to thank the PSC staff who recommended sending the letters, saying the information the utilities provide would be useful for the commission and also “very important that the public at-large have confidence in the system.”

The commissioners also heard public comment from Nick Fitzmaurice, the energy transition advocate at the Montana Environmental Information Center, and state Sen. Brad Molnar, R-Laurel, who both urged the commissioners to move ahead with the letter and investigation.

Fitzmaurice told commissioners the state and utilities should be more interested in improving battery storage and power sharing during extreme weather events, like capturing more wind energy when it is available.

“It is noted that the wind died down when the cold front settled, but that’s a good indication, one, for storage, but two, for the more advanced sharing and market system in the West, where as a cold front might move across a region, the wind is going to be available in different areas as that wind moves through,” he said. “And there’s an opportunity to tap into that and really optimally share across the West.”

Molnar called the investigation “an opportunity to study what happened right and wrong, and what can be improved upon.” He also wants to see an in-depth study performed by a group on “hedging,” where utilities buy extra power in anticipation of weather events that bring excess power demands.

John Hines, NorthWestern’s vice president of supply and Montana government relations, wrote an editorial on Jan. 25 saying the company indeed did use hedging during the cold spell to get natural gas and electricity delivered, though he did not elaborate.

“We also had over 500 megawatts of fixed-price generation or contracts that reflected generation,” Hines wrote. “It is extremely difficult to fully hedge our electric portfolio when on some days we have excess energy with variable wind generation and on other days we are short, when the wind isn’t blowing. This is a variability of energy problem, not a hedging problem.”

“The best hedge against high energy market prices is owned generation resources located in Montana and dedicated to serving our Montana customers,” he went on to say, again mentioning the plant in Laurel tied up in court decisions and the Avista share acquisition at Colstrip.

District 5 Commissioner Annie Bukacek said she agreed with the two public commenters that the letter was the start of a “fantastic” opportunity to get information on the process and risks to Montana customers. Commission Vice President Jennifer Fielder, who represents Region 4, said she was pleased the PSC had the staffing to help with the continuing investigation.

“The more we can learn from the experts at the utilities about how they’re managing these things, the more we can assess what we might want to see done different,” she said. “So I appreciate this and wholeheartedly support the effort.”