Dam purchase a watershed moment?

NorthWestern Energy’s proposed purchase of 11 hydropower dams from PPL Montana marks a watershed moment for cleaner and more affordable energy to serve Montana’s businesses and families.

When NorthWestern announced the proposed purchase last September, it noted that adding 600 megawatts of clean hydropower would diversify its resource mix and protect its customers from current and future price risks — including regulatory risks — associated with burning fossil fuels.

The latter point is particularly telling: PPL wanted NorthWestern to buy the dams as part of a package that included its shares of the Colstrip and Corette coal plants. But Northwestern ran the numbers and assigned a large negative value to the coal plants. NorthWestern — using standard industry modeling — assigned Colstrip and Corette a value of minus $340 million.

NorthWestern told the Public Service Commission, which must rule on the fiscal prudency of the purchase, that the dams consume no fossil fuels and emit no carbon, and thus “insulate customers from future carbon regulation and fuel price risk.” NorthWestern already owns 30 percent of Colstrip Unit 4 which, when operating, produces the highest-cost power in the utility’s owned portfolio. Shunning PPL’s coal shares avoids saddling Montana consumers with the long-term costs of additional coal resources.

Montana’s largest utility is in good company. Utilities across the country are fleeing costly and increasingly risky coal, and regularly announcing coal plant closures and retirements. It’s notable that not a single interested buyer of PPL’s coal plants has surfaced since NorthWestern’s hydro-only bid.

The PSC will hold public hearings over the next two months on NorthWestern’s proposal and putting the purchase costs into its rates. While the PSC must take a careful review of the purchase costs, Montanans should support the utility’s decision to spurn PPL’s coal plant shares. Additionally, consumers should urge the PSC to include a ramp up of NorthWestern’s energy efficiency acquisitions to meet peak energy needs at the lowest cost and greatest benefit to its customers.

Generally speaking, power from the dams will suffice during periods of light demand, usually nights and weekends. But NorthWestern will still need to meet peak loads on the days and times when customers are using the most energy.

Energy efficiency is by far the cheapest resource to reduce demand and fulfill peak load needs. Between 2007 and 2011, energy efficiency saved NorthWestern Energy and its customers more than $75 million. Energy efficiency could save NorthWestern customers about $320 million over the next 20 years.

Clean hydropower generated in Montana for Montanans provides many advantages for NorthWestern Energy and its customers. The return of 11 dams that for decades provided carbon-free power to local utility customers will improve NorthWestern’s stability and help it chart a cleaner, more efficient, and more affordable energy course. Assuming the purchase cost issues get resolved, Montanans will benefit if NorthWestern takes advantage of this extraordinary opportunity.

Maki is the Clean Energy Program Director for the Montana Environmental Information Center. Rivas is the Montana Policy Associate for the NW Energy Coalition.