Proposed bill puts utility customers on hook for $267M

A bill that seeks to keep coal-fired energy generation in play by significantly revising the Public Service Commission’s role in regulating utilities has raised red flags for both the PSC and environmental groups.

As written, Senate Bill 379 would allow current and future owners of coal-fired power assets to fully recover costs for any undepreciated value and remediation expenses from energy consumers. It would also allow the utility to recover market value for new ownership of a coal power asset, even if it was purchased for less than market value, a scenario that brings to mind a now-defunct proposal for NorthWestern to purchase 25% ownership of Unit 4 for from Washington-based Puget Sound Energy for $1. Additionally, SB 379 would direct the PSC to allow the continued operation of coal-fired power plants “until the commission issues an order finding that the closure of the units is in the public interest.”

The PSC staff’s analysis of the bill found that if Unit 4 of Colstrip were to shut down in 2027 as has been forecasted, NorthWestern would be permitted to recover $267 million in undepreciated value and remediation costs from its customers. Based on current customer counts, that would leave each NorthWestern ratepayer on the hook for $721 in stranded costs.

“It dismantles the traditional balance between risk and reward,” PSC policy analyst Robin Arnold told commissioners during a March 23 meeting. “This shifts all of the risk to the utility’s customers, while guaranteeing that the utility’s stakeholders will receive reward.”

The commission unanimously agreed to oppose the bill. Tony O’Donnell, who’s served on the commission since 2016, said he can’t recall a bill “more tilted exclusively to the benefit of a utility and to the detriment of ratepayers.” He had plenty of sharply worded criticism of the measure in recommending that the commission “strongly oppose” the measure.

“The very core reason for the existence of the Public Service Commission and the Montana Consumer Counsel is to apply restraint against monopolistic powers. In this bill, all restraint is completely eliminated,” O’Donnell said. “It looks like it’s entirely a wish list for NorthWestern Energy.”

Commissioner Randy Pinnocci said he thinks Montana needs more baseload energy and a greater share in Colstrip would help supply that need, but said he’s “deeply concerned with the ratepayers taking all that risk.”

Jennifer Fielder, one of the commission’s newest members, asked Arnold if there’s anything in the bill that’s salvageable with amendments. Arnold replied that “it would be difficult to amend this bill in any way to make it beneficial.”

“Staff fails to see any need for this bill,” Arnold continued. “We believe that the current processes at the commission work.”

The Montana Environmental Information Center also expressed concerns about SB 379. Anne Hedges, MEIC’s director of policy and legislative affairs, said it would force NorthWestern’s customers to pay an exorbitant sum for coal-fired power and ensure the continued operation of one of the top CO2 emitters in the western U.S. The company is so committed to coal, she said, because it profits considerably off the Colstrip plant, though it’s old, prone to breaking down, and out-of-step with modern energy portfolios.

“They are making money hand over fist in continuing to operate Colstrip,” Hedges said. “NorthWestern is trying to do everything to hold on to that plant, including bypassing all of the utility regulatory oversight norms.”

Dennis Lopach, an attorney specializing in utility law and former counsel to the PSC, told Montana Free Press in an email that SB 379 “would take us back in time,” and that he’d rather see NorthWestern come forward with a plan to transition away from Colstrip.

“The PSC’s 2008 Colstrip decision was a major departure from traditional regulation with very large cost implications for customers. To now potentially extend the 2008 rate treatment to all of Colstrip would mean rewarding NorthWestern Energy for other companies’ investment,” he said, referencing a 2008 agreement by which NorthWestern acquired partial ownership in Unit 4 of Colstrip for $187 million and received permission from the PSC to charge customers $407 million for it.

David Hoffman, NorthWestern’s director of government affairs, said the company acknowledges that Colstrip won’t be around forever, and said he sees SB 379 as a way to create “a glide path out of Colstrip.”

“The bottom line is, without this bill it’s very unlikely that NorthWestern would expand its interest in Colstrip, because it’s not a very good business model to incur that kind of risk without any rate of return or recovery of cost,” he said.

Sen. Steve Fitzpatrick, R-Great Falls, is sponsoring the bill. From his vantage, coal is a known quantity: an affordable, reliable source of energy generation that benefits customers in terms of reliability and predictable cost. Asked if the bill would still benefit NorthWestern’s customers if non-coal energy sources become significantly more affordable, he said he thinks trying to forecast what the energy market will look like in five or 10 years isn’t good policy.

Fitzpatrick said SB 379 was drafted “primarily by NorthWestern Energy.” Hoffman confirmed that the “concepts here really come from us.”

Fitzpatrick is the son of John Fitzpatrick, who for years served as the government affairs director for NorthWestern Energy — the position now held by Hoffman — prior to his retirement in 2016.

As of March 25, the Senate Energy and Telecommunications Committee had not set a hearing date for SB 379.