NW Energy agreement proposes high residential electricity rates

Laura Lundquist

After working with large corporations to come up with a price agreement, NorthWestern Energy is asking the Public Service Commission to approve an 18% increase in electrical rates for Montana’s residential customers.

Tuesday morning’s testimony on a proposed NorthWestern Energy rate increase was just the beginning of a Public Service Commission hearing slated to last at least a couple weeks.

But the opening remarks of attorneys on both sides provided a succinct overview of why residential customers could be saddled with such a significant rate increase: a settlement between the utility and its larger customers, namely large corporations, unveiled on April 3.

“We do not take the increases to our residential rates lightly. We’re committed to helping our customers manage their bills and make them more aware of all the programs available to help them pay their bills,” said Shannon Heim, NorthWestern Energy attorney and vice president. “The rate increases in this docket are necessary to continue to provide the excellent level of service currently enjoyed by all customers.”

NorthWestern Energy filed for this rate increase in August 2022, and groups soon filed to oppose or intervene on both sides of the case, partly because the utility has been trying to get money to build the Yellowstone County Generating Station, a controversial natural gas power plant near Laurel.

Attorney Diego Rivas of Northwestern Energy Coalition, one of the rate-increase opponents, stepped the PSC through NorthWestern Energy’s maneuvering as it attempted to get more money from its customers. The initial application sought PSC approval for a large rate increase without addressing issues related to the aging Colstrip generators, improvements in energy efficiency, or the needs of moderate and low-income customers, Rivas said.

That followed NorthWestern’s efforts to justify the Yellowstone County Generating Station, starting with an aborted effort to get pre-approval. Then, the utility turned to a post-build cost recovery method but later discarded that for a liability rider. When intervenors opposed that, NorthWestern Energy entered into collaboration with its larger customers. That produced the settlement that set the rates and follow-on actions that the PSC is now considering.

“The commission is placed in the difficult position of weighing the merits of the settlement, a settlement that is being presented on a take-or-leave basis. The commission should not accept that framing. The commission’s job is to act in the public’s interest, not the interest of the settling parties,” Rivas said. “The settlement imposes unacceptable and disproportionate rate hikes on its residential customers. For a utility that claims to care about its customers - and residential customers make up the vast majority of NW customers - this is highly concerning.”

The settlement resulted from meetings between NorthWestern Energy and representatives of Walmart Inc., the Montana Large Customer Group, the Montana Consumer Council, and Federal Executive Agencies representing Malmstrom Air Force Base. The Montana Large Customer Group represents ExxonMobile, Ashgrove Cement Company, Calumet Montana Refining, Enbridge USA, GCC or Grupo Cementos de Chihuahua, Idaho Forest Group, Phillips 66, REC Silicon and Stillwater Mining Company.

NorthWestern Energy’s two previous requests for rate increases totaled $6 million to $7 million each time. This time, the corporation is asking for an increase of $67.3 million on electrical rates alone. That averages out to an additional $14 a month for each household. An added property tax on electric assets boosts that increase to almost $82 million.

Denver, Colo., attorney Thorvald Nelson, representing the Montana Large Customer Group, said NorthWestern Energy’s analysis appeared to support cost increases but the Large Customer Group didn’t agree with the utility’s numbers. Where NorthWestern asked for a $91.7 million increase in electrical rates, the Large Customer Group calculations totaled $35.4 million. So they settled on $67.3 million, which was “slightly north of the midpoint,” Nelson said.

But when it came to who should pay, the parties conducted some cost-of-service studies and decided residential customers were “subsidized” so they should pay more than corporations. The NorthWestern study indicated that the rate increase for residential customers should be 21.5% while the Large Customer Group study put the increase at 26%.

“In the electric side, (studies) all showed that residential class current rates are subsidized. That is to say, residential customers in Montana incur more costs to serve than they pay in rates for serve,” Nelson said. “The settlement only contemplates an 18.2% increase. So if you accept even the NorthWestern study, the residential customers after the settlement, if it’s approved, will continue to be subsidized.”

While residential customers would be allotted the highest rate increase, customer class GS-1, which includes corporations like Walmart with its 14 Montana stores, would receive no increase.

Monica Tranel, attorney for 350 Montana, said that while corporations like Walmart could offset an increase by passing their costs onto the customer, residential ratepayers can’t.

Finally, while the settlement doesn’t provide money to build the Yellowstone County Generating Station, it does allow NorthWestern Energy to return to the PSC afterward and ask for another rate increase to recover the costs and the Large Customer Group has agreed not to oppose it.

Tranel asked the PSC to ask three questions. Why is the gas power plant part of the settlement or the rate case since it’s yet not built? Why are the cost percentages so discriminatory, favoring big business over Montanans? Why is the increase so much?

“Why are we here? These are not the greenies of Missoula protesting coal strip and a gas plant. That’s not why we’re here today. It’s because this utility, their management has failed to plan. And the cost for that should be borne by management and the shareholders, not the ratepayers.”

A group of Missoulians, many members of 350 Montana, did travel to Helena to comment at the beginning of the meeting, even though NorthWestern Energy objected to allowing any manager of an intervening party to comment. Commissioner Jim Brown said public comment would be allowed each morning before the hearing continues. The PSC is also accepting emailed public comments.

Missoulian Jim Roach said Montanans are pissed off with what they’re already having to pay and now NorthWestern wants to charge more for generators using fossil fuels instead of renewable energy.

“NorthWestern is asking their customers to pay for infrastructure that uses obsolete technology and results in the most expensive energy rates in the region,” Roach said. “It’s not like NorthWestern ratepayers can shop around for energy. Only a monopoly utility can have that. It seems to me they’re forcing the most costly choices on their captive customers.”

Opponents of the rate increase included 350 Montana, Montana Environmental Information Center, Renewable Northwest, Northwestern Energy Coalition, Natural Resources Defense Council, Human Rights Network, and Broad Reach Power, Inc., a renewable energy company.