Senate Bill 379, currently being considered by the Montana Legislature, may be a dream come true for Northwestern Energy, but for ordinary, hardworking Montanans, it’s a nightmare.
In 2008, Northwestern bought a 30% share of the Colstrip 4 generating station for $187 million. The Montana Consumer Counsel testified that the book value of Unit 4 was $37 million, but NorthWestern managed to convince the PSC that it was worth a lot more than that: $404 million! The PSC decided that Northwestern could recover all that, plus a 10% return, from its customers in their monthly power bills. To get that money, Northwestern was allowed to run the plant until 2042. If it shuts down before then, Northwestern would be stuck with what’s called a “stranded asset.” Nobody should be expected to pay if it’s just sitting there, doing nothing.
But that’s just what’s going to happen. The other owners of Colstrip have owned it for decades, they are not making huge profits off of Unit 4 and have no economic reason to keep it open. They want to shut it down in 2027 or sooner, and if that happens, Northwestern’s cash cow dies. As of December of 2018, Montanans still owe $303 million on Unit 4. Why is Colstrip Unit 4 such a bad deal for ratepayers? Let’s take the cost of debt as one example. Our rates are set as if the cost of NorthWestern’s debt on Unit 4 is 6.5%. NorthWestern in fact pays an actual cost of debt of about 4%. So, on the debt cost alone, Montanans are sending about 4 million dollars to Wall Street every year that we could be keeping at home.
Along comes SB 379, which, with the Legislature’s connivance, allows NorthWestern, without PSC approval, to buy out the other owners, keep the plant running, and continuing to collect excessive profits (like the cost of debt). The bill allows Northwestern, if it does buy out the other owners, to set the value of their shares at $1.9 billion, and recover that amount, plus a return, from its Montana customers. On average, every Montana customer would pay $700 a year, every year through 2042, as a result. That would be true even if the plant were shut down, or if Northwestern paid $1 for other owners’ shares, which in 2019 it told the Legislature it could do!
In the past several years, the Colstrip 4 plant, which is now quite old and decrepit, has had to shut down unexpectedly. When that happens, Northwestern had to buy replacement power to the tune of some $14 million. Northwestern argued, unsuccessfully, that customers should pay for that replacement power, and SB 379 requires Montanans to do just that. In other words, we pay for a broken-down plant, plus profit to NorthWestern, and then we also pay for power from the market to heat our homes while the plant is broken. SB 379 locks in that structure of inequality and forces us to pay for NorthWestern’s uneconomic investments.
If you would rather not pay an additional $15,000 for an old broken down plant then call any of the Republican members of the committee hearing this bill, and let them know you oppose it.
Monica Tranel grew up in eastern Montana and represents clients in front of the PSC. She formerly worked as a staff attorney for the PSC and the Montana Consumer Counsel.