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HELENA — Montana’s largest power utility, NorthWestern Energy, said Dec. 10 it plans to expand its investment in the aging Colstrip coal power plant by purchasing an additional 25% stake in Colstrip Unit 4 from Washington-based Puget Sound Energy for $1.
NorthWestern, which would own a 55% stake in Unit 4 if the deal goes through, said the purchase would add 185 megawatts of generating capacity to its portfolio and help close what it calls an “urgent capacity shortage” as regional utilities divest from coal plants.
The South Dakota-based company said it will seek pre-approval for the deal from the Montana Public Service Commission, which regulates the monopoly utility with a mandate to ensure fair power rates for Montana customers. NorthWestern said it will propose an arrangement with “zero net effect on customer bills.”
After the company’s release went out, NorthWestern spokesperson Jo Dee Black clarified that the deal would have no net impact on customer rates in its first year. Beyond that, it would be factored into rates set by regulatory proceedings, she said, adding that NorthWestern expects the deal to save customers $30 to $40 million over five years.
“Securing more capacity for only a $1 investment is a unique opportunity that helps give us the time to continue transitioning to an even cleaner energy future without putting either our customers’ safety or their ability to pay their energy bills at risk,” NorthWestern CEO Bob Rowe said in a release.
The company also pledged Dec. 10 to reduce the “carbon intensity” of its generating portfolio to 90 percent below 2010 levels by 2045.
“Nothing is more important to the people of NorthWestern than safely providing Montanans with the affordable and reliable energy we all need while also protecting our environment,” Rowe said. “We take that dual responsibility seriously.”
Renewable power advocates criticized both announcements, expressing skepticism about NorthWestern’s claim that the purchase would not raise customers’ bills and calling the 2045 goal less ambitious than renewable power targets set by other large utilities in the region.
“Montana’s economy, our agriculture, and our forests can’t wait 25 years to tackle our climate crisis,” said the Montana Environmental Information Center’s Anne Hedges.
Spokane-based Avista has said it will have a carbon-neutral energy supply by 2027 and supply its customers with “100% clean energy” by 2045. Boise-based Idaho Power has also said it is committed to reaching a 100% clean energy mark by 2045.
In an energy supply plan pending before state utility regulators, NorthWestern said a wave of planned coal plant closures in the Pacific Northwest, including Colstrip’s older generating units 1 and 2, mean the region is heading toward a likely generating capacity shortage that could cause blackouts in high-demand periods when weather limits production from wind and solar facilities. While the company has historically purchased market power when its in-house generating capacity isn’t enough to serve Montana customers, it argues coal divestment is making the regional energy market increasingly unreliable.
“Every other utility in the nation is moving away from coal. And they’re doing it for really good reasons — because there are cleaner, cheaper options available.”—Anne Hedges, Montana Environmental Information Center
Renewable energy advocates, concerned about the climate impacts of continuing to operate coal-burning plants and building new gas-powered ones, argue NorthWestern should instead invest in wind and solar power generation and energy storage.
“Every other utility in the nation is moving away from coal,” Hedges said. “And they’re doing it for really good reasons — because there are cleaner, cheaper options available.”
Hedges said Colstrip Unit 4, which began operating in 1985, has a history of maintenance issues. According to regulatory filings by a partial owner in Washington, it is also facing a $20 million boiler upgrade, she said.
NorthWestern said it expects to spend about $15 million a year on operations and maintenance for the additional share of Unit 4. It said a 5-year power purchase agreement with Puget Sound will cover half that amount, and that it expects to make up the remainder by buying less power on the regional energy market.
“Even with projected operating and maintenance costs factored in, purchasing more of Colstrip Unit 4 for only one dollar is by far the most affordable way to help close the gap in the capacity shortage facing our customers,” NorthWestern Vice President of Supply and Montana Government Affairs John Hines said in the company’s release.
NorthWestern said Puget Sound will remain responsible for its presale share of environmental remediation and decommissioning costs. State environmental regulators have estimated that one portion of Colstrip’s remediation, clean-up of the facility’s coal ash ponds, could cost as much as $700 million, according to the Billings Gazette.
“We’re excited to take this major step forward in creating a better energy future for our customers and the state of Washington,” Puget Sound executive David Mills said in a Dec. 10 release. Puget Sound noted that the deal requires approval by the Washington Utilities and Transportation Commission.
Contingent on PSC approval of its Colstrip acquisition, NorthWestern also said it will buy some of Puget Sound’s stake in the 500 kilovolt transmission line that transports power from Colstrip toward West Coast power markets. That transmission system, which the company calls the “backbone” of Montana’s energy grid, also transports power within the state and helps eastern Montana wind and solar developments export power to coastal markets.
“Securing more capacity for only a $1 investment is a unique opportunity that helps give us the time to continue transitioning to an even cleaner energy future without putting either our customers’ safety or their ability to pay their energy bills at risk.”—NorthWestern Energy CEO Bob Rowe
A series of bills introduced during the 2019 Montana Legislature sought to make acquiring a greater share of Colstrip easier for NorthWestern by limiting the Public Service Commission’s regulatory authority over a purchase. Those bills, one of which temporarily stalled the renewal of Montana’s expanded Medicaid program, were ultimately voted down by lawmakers.
The Colstrip Power Plant consists of four generating units. Plant operator Talon Montana, which co-owns the older and smaller units 1 and 2 with Puget Sound, plans to shut them down in the coming months, according to the Billings Gazette. Ownership of units 3 and 4, each with 778 megawatts of capacity, is split between several owners including NorthWestern, which has owned a 30% stake in Unit 4 since 2007.
While Colstrip has historically exported power to West Coast consumers, lawmakers in Washington and Oregon have passed legislation forcing utilities in those states to phase out coal power by 2025 and 2030, respectively. All owners of Colstrip units 3 and 4 other than NorthWestern expect to exit the facility no later than 2030, according to Public Service Commission staff.
This story has been updated to include a clarifying statement from a NorthWestern spokesperson about the deal’s effect on customer power rates.