Keila Szpaller

Montana is still feeling the effects of energy deregulation — the “worst policy decision in the history of the state” — and it’s at risk of falling behind regional planning efforts when it comes to power.

That’s part of an update Montana Public Service Commission President Jim Brown gave this week to the legislative Energy and Telecommunications Interim Committee.

Brown discussed deregulation in the context of a request by NorthWestern Energy to separate its Montana assets from other assets — a request the Public Service Commission unanimously approved in February.

The PSC regulates monopoly utilities in Montana including NorthWestern Energy.

At the presentation Tuesday to the legislative committee, Brown characterized the restructure proposal as “one of the most impactful dockets for Montana” for the long term.

He said when the PSC approved the restructure, its decision included releasing NorthWestern from a 2003 bankruptcy proceeding, part of the aftermath of the deregulation debacle.

In 1997, the legislature and governor signed off on the deregulation of electricity prices with the idea the free market would result in lower rates for Montanans.

But the owners of Montana Power Co., sold off the company in parts.

NorthWestern Energy bought the lines, and the state paved the way for it to buy back dams to generate electricity — but customers had to pay for the dams again.

Now, electricity rates in Montana are among the highest in the nation, Brown said.

He said he supported the restructure proposal from NorthWestern Energy in part because he believes specific clauses protect the public.

For example, consumers won’t assume the costs of the restructure, he said. Also, he said the deal includes “ring fencing” provisions, or the insulation of Montana assets against negative risk.

“I see no diminution in the protections to ratepayers in Montana,” Brown said.

However, Brown also said the fact Montanans are still experiencing the consequences of the deregulation decision 26 years ago should give people who support “energy choice” much pause — an opinion he said was his own. “Energy choice” means consumers can choose their own supplier.

In response to a question from Sen. Daniel Zolnikov, R-Billings, NorthWestern Energy’s Chris Puyear said the reason the utility sought the restructure was it’s a best practice and allows the company to isolate its respective assets by state.

“So Montana customers are insulated from decisions and actions in South Dakota and Nebraska,” Puyear said. “And conversely, those customers in those states are insulated from decisions in Montana. I think that’s really the predominant benefit.”

In a phone call after the meeting, Anne Hedges of the Montana Environmental Information Center said it’s likely escalating costs in Montana are worrisome to NorthWestern directors elsewhere.

The MEIC was not involved in the restructure proposal but works on energy issues in the state.

“Montana’s rates are rising dramatically, and it’s likely South Dakota doesn’t want to pay for the mismanagement that is occurring in Montana,” Hedges said.

At the meeting, Brown also discussed how Montana will handle power in the future.

He said regulators in the West share a concern that population growth in the region coupled with production mean resources are “trending towards inadequacy.”

“There is growing concern among regulatory commissions all across the West that we may be capacity short,” Brown said.

Sen. Christopher Pope, D-Bozeman, wanted to know the best way the Public Service Commission could play a role in discussions about regionalization to protect ratepayers.

Brown had said industry conversations are moving toward managing energy regionally, a somewhat different approach than state utility regulation.

In response to Pope, Brown said he fears Montana is falling behind its peers because the Public Service Commission doesn’t have the capacity or resources to lead such discussions.

The PSC has asked for another employee to deal with the topic, and Pope said he would be in support.

Brown also encouraged the committee to keep an eye on the Bonneville Power Administration, which markets power from 31 dams. He said it’s important BPA doesn’t serve only the “I-5 corridor,” California, Oregon and Washington, to the detriment of Montana in the future.

The committee and PSC have a common interest that Montana citizens don’t end up “at the end of the line for power generation and production and transmission,” Brown said.

Rates already are high in Montana, in part because of deregulation, he said.

“If we’re the loser in regionalization debate, rates are going to be exorbitant in Montana because we don’t have the population mass,” Brown said.

On Wednesday, a separate legislative committee on energy planning launched discussions as a product of House Bill 220.

The bill states access to reliable and affordable power is foundational to the health and the economic well-being of Montanans.

However, the bill notes electric consumers in Montana “face growing reliability risks and rising energy bills” due to volatile markets and retirement of on-demand generation in Montana and elsewhere.

The Special Select Committee on Energy Resource Planning and Acquisition is made up of lawmakers and representatives from the PSC, Montana Consumer Counsel, NorthWestern Energy, and Renewable Northwest, and others.

The committee will review power supply planning and acquisition in Montana and compare processes in the state to those in other states, among other tasks.

Thursday, legislative research analyst Trevor Graff said similar conversations had taken place in the past about energy planning, but they were disjointed and did not take the wholistic approach of the select committee.

Graff also said he anticipated a lot of participation from the public.

“(We’re) already hearing a lot of interest from different industry stakeholders and members of the public as to what you all are up to in this committee,” Graff said.