PSC hears pushback on new rules, but NorthWestern gives them the nod

(Daily Montanan) Just one group offered praise at a hearing Tuesday on an exhaustive revision to the way regulators evaluate and energy utilities acquire new resources: the utilities themselves, NorthWestern Energy and Montana-Dakota Utilities.

At the Montana Public Service Commission meeting, opponents said it’s no surprise given the lobbying strength of the proponents, and if the revisions take effect, they will cost consumers more money and put them at greater risk. For one, Irion Sanger said Montana won’t be able to adequately compete in the region, and that will have consequences.

“The proposed rules are likely to harm ratepayers,” said Sanger, a lawyer who offered detailed testimony on behalf of the Northwest & Intermountain Power Producers Coalition.

At the meeting, opponents criticized the revisions as completely contrary to the intent of House Bill 597, which aimed in part to give the PSC greater ability to vet a utility’s plan to meet long-term capacity needs and to ensure the utility could fulfill them “in a reliable and affordable manner.”

Critics also alleged the changes were the result of backroom meetings with industry representatives, and they called on the Public Service Commission to ensure it was protecting ratepayers with a thorough and transparent process. The regulatory body is charged with balancing fair rates to consumers against ensuring utilities are financially sound.

But proponents kicked off the public remarks, and NorthWestern’s Director of Regulatory Counsel Shannon Heim said the need to accurately and effectively plan is at the heart of the utility’s business, and good planning means customers can access a reliable and consistent power supply. Heim said the lengthy revision process was painful with a lot of “behind the scenes work and workshopping,” but she believes the current draft reflects an “enhanced understanding” that came out of conversations between stakeholders and PSC staff.

“It’s no exaggeration to say that this is the most momentous rulemaking the commission has undertaken in years,” Heim said.

Generally, opponents spoke to the significance of the changes that will influence the PSC’s ability to evaluate a utility’s “integrated resource plan” and how utilities bring on electric resources in the future. Those speaking against the revisions included the NW Energy Coalition, the Natural Resource Defenses Council, an informal coalition of large industrial energy consumers, members of the public, and other organizations.

“We believe the commission has a once-in-a-generation opportunity to adopt clear and simple rules that will save ratepayers millions of dollars when the utilities are going out to acquire significant new resources to meet their future load,” Sanger said. “Without changes, NIPPC fears that Montana will be the only state in the Intermountain Pacific Northwest that has these sorts of rules in which there’s not a robust process to ensure that the benefits of the competitive wholesale market are realized.

“These rules we believe will result in higher costs, higher risk, and lower reliability of the electric generation used to serve ratepayers.”

More specifically, opponents in part said letting the utility choose its own third-party administrator to run a request for proposals was akin to having the fox guarding the henhouse. They also called on the PSC to create incentives for competitive solicitation into the process, not just encourage it, to ensure the lowest cost for Montana consumers.

In public comment, former Rep. Daniel Zolnikov, who sponsored legislation the rules ostensibly implement, said he was going to be “blunt” and “clear” about the PSC’s most recent draft: “I am not in support of the current rules proposed by the PSC.”

In fact, Zolnikov, a Billings Republican, said the revisions represent a 180-degree turn from an earlier draft, and he surmised a representative from the utilities rewrote them. He also said he was dismayed to learn the utilities had mischaracterized the earlier draft as not adhering to the intent of the law, and as the sponsor of HB 597 in 2019, he wanted to set the record straight.

“They actually fought tooth and nail to prevent the law from passing the Legislature and then lobbied the Governor’s Office to prevent it from becoming law,” Zolnikov said.

In the current draft, Zolnikov said “‘shall’ was changed to ‘should’ dozens of times,” and he argued “rules that are permissive aren’t rules.” He compared the change to parents telling children they “should” clean their room.

The law took effect in July 2020. After seeking public comment first in January 2021 and again eight months later, the PSC’s notice of the Tuesday hearing notes it will accept comments until August 22 for the proposal to fully repeal the current administrative rules and adopt new ones.

At the very least, the rules the PSC adopts should follow the law, said Jenny Harbine, a lawyer representing the Montana Environmental Information Center. Harbine said the PSC’s authority and obligations are broader than the statute under consideration, and she encouraged the body to adopt policies that simulate competition given it regulates monopolies.

“This is done by ensuring that the utility considers the broadest possible range of alternatives and thoroughly evaluates the costs and benefits of each, including whether those benefits accrue primarily to customers rather than to the utility,” Harbine said.

But she said the rules on the table don’t even meet the bare minimum standards of the new statute. For example, she said the statute requires an “evaluation” of the full range of cost effective resources, but the proposed rules call for only a “description,” in other words, “a lower standard.”

Steve Krum, of Laurel, said he too opposed the “weaker” rules. He said ratepayers end up being left out of the conversation, and he asked the PSC to go slow, be transparent, and refrain from backroom meetings, ones he said he hears about but the public isn’t invited to attend.

“We count on you, the PSC, to look out for our well being, and I don’t feel this happened in Laurel,” Krum said of the new natural gas plant approved there. “I believe Laurel is headed towards a nightmare of noise and air pollution. We are the result of weaker rules, not stronger rules, stronger and fairer regulations. Please don’t let this happen again in our state.”