Keila Szpaller

(Daily Montanan) NorthWestern Energy customers have paid $200 million more than they should have since 2005 because the utility’s advanced purchases of gas and electricity ended up higher than prices on the market — including $11 million in natural gas in the most recent year, according to the Montana Consumer Counsel.

NorthWestern Energy, however, argues it is making those purchases in advance in order to protect customers from market volatility, and it isn’t fair to make comparisons only after the actual prices are known — and lower than the amount it paid.

The Montana Public Service Commission held Tuesday a hearing on NorthWestern Energy’s application to adjust its natural gas rates from the July 1, 2022, to June 30, 2023, period. The PSC temporarily authorized an increase in June 2023.

However, the Montana Consumer Counsel subsequently intervened and said customers should not be billed for $13.2 million in recent purchases — including $2 million outside the tracking period, according to a PSC memorandum about the case.

The debate comes on the heels of a recent settlement that resulted in steep increases for NorthWestern’s residential and small business customers — 24% and 25% in roughly one year. In public comment Tuesday, Montanans raised concerns about cost, the PSC’s ability to oversee the utility, and environmental impacts.

“It appears that the public part of the name Public Service Commission has been completely forgotten by the members of this publicly elected body,” said Hutcheon (a member of the public whose first name was not intelligible via video).

The Public Service Commission is made up of five commissioners elected by district. They are currently all Republican.

In public comment, members of the nonprofits Montana Environmental Information Center and the Sierra Club said environmental impacts need to be part of the equation. The Sierra Club’s Tyler Halligan said the PSC needs to scrutinize this request from NorthWestern — which he said equals $53 a year for the average customer — and others.

“It’s disheartening to witness NorthWestern Energy persistently investing in unnecessary, expensive and polluting fossil fuel resources while attempting to pass the financial burden to its customers,” Halligan said.

The utility argues its fixed-rate contracts protect customers, but the Montana Consumer Counsel said the customers are paying a higher amount than they would have paid if NorthWestern hadn’t made those purchases at all.

For example, for July, August and September of 2022, NorthWestern paid $18.6 million in advance for natural gas that would have cost just $9.7 million had it waited, according to data from the Montana Consumer Counsel. That’s a loss of $8.7 million, the Consumer Counsel said.

In opening remarks, Montana Consumer Counsel’s Jason Brown said all those costs get passed onto customers. NorthWestern doesn’t make money off the contracts, he said — or suffer any losses.

“So this is really akin to gambling with someone else’s money, something I don’t think any of us would be comfortable with,” Brown said.

Commissioner Randy Pinocci, however, said it’s likely NorthWestern made hedges in the past that saved customers money.

“So it looks like it was a bad hedge. We’re talking about $11 million,” Pinocci said. “When the hedge is right, and you save money, I don’t suppose we ever have a hearing to say, ‘Good job.’”

The Montana Consumer Counsel argues NorthWestern Energy should not be permitted to make those fixed-price purchases, or hedges, at all given the losses. It argues the utility shouldn’t be able to charge customers for any of them this year either.

Brown also said NorthWestern’s previous experience with electricity hedging and ensuing disputes at the PSC should be examined. Prior to witness testimony, however, PSC President James Brown said the current case was about a different commodity and the actions commissioners previously took was not relevant.

In opening remarks for NorthWestern, lawyer Mitch WerBell said 2022 was “far from a normal year,” citing in part Russia’s invasion of Ukraine, a volatile energy market, and below average natural gas storage in this country.

He said NorthWestern customers are in a natural “short position” because the utility needs to procure 84% of its supply from the market.

At the time, WerBell said industry forecasts indicated prices would remain high, and he said NorthWestern took steps to protect its customers. He said that included procuring just 20% of supply for summer 2023, which he said was prudent.

“Notably, Northwestern’s balanced approach still provides customers with access to the market. It also mitigates volatility and provides rate stability,” WerBell said.

He also said the Public Service Commission was fully aware of NorthWestern’s actions at the time because the company alerted the agency to its plans.

The PSC heard public comment and opening remarks Tuesday morning. The hearing concluded in the afternoon, and the lawyers opted to make their closing arguments in written briefs.