Keila Szpaller

(Daily Montanan) The Public Service Commission needs to reconsider its recent rate hike for NorthWestern Energy because its order invents a “magical” new standard to evaluate costs — one with no legal authority — and sends shareholders $3.4 million that belongs to Montanas.

So says part of a motion to reconsider filed last week by 350 Montana, one of the parties in the case the regulatory body took up last month.

Late on Monday, the PSC received a second motion to reconsider from a separate party arguing a serious violation of due process.

On Oct. 25, the PSC voted 5-0 to approve a settlement that translates into a 28% rate increase for NorthWestern electric customers from August 2022 — or an 8% increase from current rates.

But not all parties signed onto the settlement, including 350 Montana, a climate action group that advocates for a livable planet and a reduction in carbon dioxide emissions, and Broad Reach Power, an energy storage company that filed Monday’s motion to reconsider.

Lucas Hamilton, chief legal counsel for the PSC, said Monday any of the parties may file a motion to reconsider within 10 days, and even one commissioner can request the item be placed on the PSC work session agenda.

Hamilton also said the unanimous vote last month in favor of the settlement doesn’t necessarily indicate a motion to reconsider is sunk from the start.

“I would say there are other factors at play,” Hamilton said. “There would be any number of reasons why the commissioners could be persuaded by the parties’ arguments on reconsideration.”

Lawyer Monica Tranel of the Tranel Law Firm in Missoula represents 350 Montana.

Tranel, a Democrat running again to represent Montana’s western district in Congress, described the increase as a “rate heist” in a campaign email Monday — and noted incumbent U.S. Rep. Ryan Zinke, a Republican to whom she lost in the last election, has stayed “silent” on the decision.

Michael Uda, of the Uda Law Firm in Helena, argues the settlement was problematic for a variety of reasons. For starters, his motion said it amounted to “an entirely new rate proposal,” one that lacked adequate notice and left the other parties scrambling with just eight days to understand it in time for the hearing.

Climate impacts

The motion from 350 Montana raises numerous issues.

For one, it argues the order should be amended to clarify that the PSC will include in any review of a new gas-fired plant “the potential effects on the climate, environment and health of Montanans” of emissions from the facility.

The potential adverse impacts from plant emissions have been “the subject of intense litigation,” the motion said, including in the historic Held v. Montana decision in August this year.

In that case, now being appealed to the Montana Supreme Court, a district court enjoined two sections of law that prohibited the state from taking greenhouse gas emissions into account when considering energy permits, and it found the state constitution’s protection of a clean and healthful environment includes climate.

But 350’s motion to reconsider the rate hike notes explicit mention of climate effects is missing in the PSC’s order.

For example, it said one paragraph lists 20 topics NorthWestern suggests the PSC consider in a future cost review of the plant in Laurel, but “notably absent” is the potential effect of greenhouse gas emissions on climate, the environment and health.

“It makes no sense to ignore the elephant in the room,” the motion said; it said NorthWestern has estimated carbon emissions, but hasn’t factored in related costs in deciding to build the plant.

At the very least, 350 Montana argues, including climate may avoid potential litigation later on that could result in a court throwing out the order for failing to address the topic.

A ‘magical zone’

The motion from 350 also said the PSC is supposed to ensure rates are “just and reasonable,” but in its most recent order, it approved rates “based on an unsupported statement that they fall in a ‘zone of reasonableness.’”

“The Commission cites no prior order or case where this standard was used, where it came from, how it was adopted, or why it applies here,” the motion said. “There is no explanation as to where the Commission gave notice to the parties that this was the standard it intended to apply.”

Rather, the commission adopted the “zone of reasonableness” to evaluate costs for the first time in its final order, and doing so is “arbitrary and capricious,” the motion said.

The motion also said the PSC needs to explain how that “zone” relates to the decision to approve another $81 million in revenue for NorthWestern as opposed to other amounts presented, such as $47 million or $105 million.

“There is no record evidence to support the Commission’s determination that some magical zone of reasonableness exists, and within the magical zone, the settlement of $81 million happily resides, unassailable because it’s ‘in the zone,’” the motion said.

Laurel plant costs, and a ‘gift’ to shareholders

The motion from 350 Montana also said the PSC needs to evaluate the $300 million gas plant being built in Laurel in a single rate case and not piecemeal, to “ensure that all the costs associated with the plant are being considered in one filing.”

The order allows NorthWestern to file for operating expenses for the gas plant, but before the PSC issues a final decision on whether the cost of the plant “was prudently incurred,” the motion said.

“Should that happen, the commission will be allowing NorthWestern to impose operating expenses on Montana ratepayers prior to a decision about whether the plant should have been built at all,” said the motion, arguing the PSC should reject any language that allows piecemeal costs to be approved as illegal.

The motion also said the order needs to be fixed so it reflects the real cost of debt on the coal-fired plant at Colstrip. The real cost is 4.01%, but Montanans are paying rates as if the debt is 6.5%, the motion said.

“The difference is a gift to NorthWestern’s shareholders, paid by Montanans, and should be trued up (or aligned) and deducted from the settlement” to the tune of $3.4 million, as Montana 350 requested earlier, the motion said.

The motion also said any advertising costs need to be excluded from the final order, as required by law; it noted the order does not delineate those costs.

Hamilton, chief legal counsel, said the PSC will generally act on a motion to reconsider within 20 days or ignore it, in which case it’s deemed denied. He also said the PSC may waive the deadline and schedule a work session if, for example, any one particular motion is complicated or multiple motions are filed.