NorthWestern’s new shares at Colstrip to cost $18M in operations
Keila Szpaller
(Daily Montanan) NorthWestern Energy, the state’s largest public utility, is asking regulators to allow it to temporarily tap a credit for customers to help pay for an additional $18 million associated with buying more of the Colstrip plant.
On Jan. 1, 2026, the monopoly utility will control 55% of the coal-fired electricity generation plant at Colstrip following a couple of recent acquisitions from Avista Corp and Puget Sound Energy.
In a motion pending with the Montana Public Service Commission, NorthWestern argues the newly acquired 222 megawatts from Avista will ensure reliable power for customers, but the acquisition comes with $18 million in operations and maintenance costs.
“These costs are not currently reflected in customer rates and represent a significant financial obligation for NorthWestern,” the utility argued in the August 29 motion first reported by the Montana Free Press.
When NorthWestern Energy has extra energy, it can sell the generation.
Revenue from those contracts typically are counted as credits to customers, but NorthWestern said it makes sense to use the income from three new contracts to pay for new operations and fuel costs, since the Colstrip acquisition benefits customers too.
It said this “limited carveout” also would reduce “interim financial impacts to NorthWestern.”
The Public Service Commission will take action on the motion after Oct. 15, the deadline for any parties to intervene in the case, and following any subsequent responses to the motion and rebuttal from NorthWestern, said PSC Executive Director Alana Lake.
NorthWestern Energy announced the acquisition of the Avista shares in January 2023 and of 370 megawatts from Puget Sound in July 2024.
Both companies operate in the state of Washington, which banned the use of coal-generated electricity for its customers by the end of this year. But Avista said it wanted to exit the plant anyway because continuing to operate it wasn’t economically feasible, according to the Spokesman Review.
NorthWestern did not have a breakdown of the $18 million.
In the motion for a waiver, NorthWestern Energy requested approval to use revenue from three new sales contracts it said are associated with the Avista shares to offset the new $18 million in operations and maintenance costs for 2026.
Those three contracts are with Big Horn County Electric Cooperative and Energy Keepers (it has two deals with Energy Keepers).
NorthWestern said those contracts, to sell electricity when it has extra, were possible, “in part,” by the addition of the new megawatts at Colstrip, and customers benefit from the additional generation capacity.
As proposed in the motion, customers would get any revenue that exceeds operations and maintenance and fuel, but NorthWestern would not seek to recover a shortfall if the revenue is less than those costs.
NorthWestern said it will begin serving customers on Jan. 1, 2026, but without the waiver, operations and maintenance costs won’t be included in customer rates “until a future rate review.”
“Without (the waiver), NorthWestern will bear the entirety of the approximately $18 million in annual New Colstrip (Avista) O&M while customers receive the full benefit of the Designated Revenues made possible, in part, by the Colstrip addition,” NorthWestern argued.
Usually, fuel costs to the utility and credits from sales contracts are accounted for in a quarterly adjustment, a Power Costs and Credits Adjustment Mechanism, or PCCAM.
In the motion, NorthWestern also proposed to exclude its fuel costs associated with the contracts from the adjustment.
If the Public Service Commission denies the request for an exception, Lake said those revenues and fuel costs would continue to be accounted for in that adjustment.
“The O&M costs not tracked through the PCCAM would remain NorthWestern’s responsibility until the company obtains Commission approval to adjust base rates in a future rate case,” Lake said.
In January 2023, NorthWestern Vice President John Hines said the purchase from Avista cost zero dollars, and customers would likely see a $30 million to $40 million cost reduction.
NorthWestern Energy spokesperson Jo Dee Black said this week the utility could not immediately address whether those estimates remain current.
However, she said customers will see a benefit because if the utility hadn’t acquired Avista’s share of Colstrip, it would need to buy additional capacity on the open market “to meet reliability requirements,” and operating costs at Colstrip are lower.
In January 2024, the plant broke down during a cold snap, and NorthWestern bought power on the market. In a memo to the PSC, the utility reported the cost to customers to be $39 million.
In an email this week, Black said the Colstrip Plant is “a dependable bridge to Montana’s cleaner energy future.”
“Unlike other states that are moving away from coal, this acquisition gives us the flexibility to transition to cleaner energy at a pace that works for Montanans — without compromising reliability or affordability,” Black said.
Last month, Gov. Greg Gianforte convened an energy task force to work on energy solutions for Montana, citing a projected increase in demand of 20% in the next decade, and the need businesses and families have for affordable and reliable energy.
The task force, which includes a NorthWestern vice president and a former member of the PSC among its 20 members, is charged with “fuel neutrality” in its approach to designing solutions, due in September 2026.
Gianforte, however, is credited with putting the wheels in motion for NorthWestern to acquire the Avista share of Colstrip, and in January 2023, he said it was part of ensuring a stable grid for Montana.
His office did not respond to a request for comment this week on whether the $18 million in operations costs raise concerns about the acquisition, but NorthWestern said customers are expected to save overall.
Black also said NorthWestern does not intend to make a similar request for operations and maintenance costs in 2026 for its acquisition from Puget Sound Energy.