The Colstrip Power Plant, photographed in August 2019. Credit: Erick Dietrich / MTFP

NorthWestern Energy said Thursday it is withdrawing a bid to purchase an expanded share in the Colstrip coal power plant from Washington-based Puget Sound Energy, blaming the Washington state government and the Montana Public Service Commission for failing to support the acquisition.

“It is disappointing that policies enacted by the Washington legislature are controlling Montana’s natural resources and our ability to reliably and cost-effectively serve our Montana customers,” NorthWestern government affairs VP John Hines said in a statement. “It is also disappointing that decisions by the Montana Public Service Commission have been so unsupportive of this vital generation.”

The company, Montana’s largest power utility, announced its bid for an additional 25% stake in Colstrip Unit 4 last December. It said it had negotiated a $1 purchase price with PSE, which faces Washington state legislation requiring it to phase coal power out of its supply portfolio by 2025.

At the time, NorthWestern called the arrangement an ideal way to add 185 megawatts of generating capacity to its portfolio, saying that would be a cost-effective way to keep Montana’s power supply reliable as the regional energy grid shifts away from coal power toward renewable sources.

NorthWestern has argued that the power sector’s shift away from coal, driven partly by concern about climate change, means it is increasingly risky for the company to continue its longtime strategy of relying on energy markets to meet supply at peak demand times when its in-house generating assets can’t supply enough power. The company says it needs several hundred additional megawatts of flexible power supply, and has raised the specter of potential power supply gaps if it isn’t able to secure that capacity.

“One only needs to look at the blackouts in California this past summer to appreciate the significance of the need for capacity resources,” Hines said in Thursday’s statement. “It is no longer hypothetical, capacity shortages are real.”

Renewable energy advocates have argued that wind and solar development, much of it undertaken by independent generators that sell power onto the company’s grid, can meet Montana’s electricity needs more effectively than continuing to rely on the aging coal plant.

NorthWestern’s bid for a bigger slice of Colstrip had already hit multiple hurdles.

Talen Energy, the company that runs operations at Colstrip, said in April that it was exercising its right to half of the Unit 4 stake that PSE was selling, reducing the portion available to NorthWestern — and reducing the purchase price to $0.50.

Earlier this month, staff at the Washington Utilities and Transportation Commission, which needed to sign off on PSE’s sale, also advised that state’s equivalent of the PSC to oppose the deal. PSE, agency staff said, “has not demonstrated that the sales are in the best interest of the public.”

NorthWestern’s release said it has “agreed with Puget Sound Energy” to abandon the deal “[a]fter evaluating recent Montana regulatory decisions regarding Colstrip.”

Earlier this week, NorthWestern issued a separate release criticizing a decision in which the PSC declined to allow the company to recover $5.7 million in losses it had incurred during a two-and-a-half-month period in 2018 when Colstrip Unit 4 was offline for maintenance required to meet air pollution standards. The commission’s decision forced the utility, which had to purchase power elsewhere while the coal-fired generating unit was out of service, to absorb those losses rather than passing them on to customers via higher power bills.

That and other decisions by the PSC “make it very difficult to purchase the proposed additional interest in Colstrip Unit 4 for $0.50,” Hines said in the earlier release.

A statement from the PSC about the maintenance cost recovery decision said the commission had “determined NorthWestern’s supervision of the Colstrip plant was imprudent, and that a reasonable utility in NorthWestern’s position would have taken more proactive steps to ensure compliance with emissions standards.”

The Colstrip power plant consists of four generating units. Units 1 and 2 were shut down earlier this year. 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.

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Eric Dietrich

Eric Dietrich is a journalist and data designer and the founder of the Long Streets economic reporting project. He has worked for the Great Falls Tribune, Bozeman Daily Chronicle, and Solutions Journalism Network. Contact Eric at edietrich@montanafreepress.org and follow him on Twitter.