Competing visions for the relationship between PSC and NorthWestern Energy

The House Energy, Technology and Federal Relations Committee heard testimony on two bills Wednesday that could affect the relationship between NorthWestern Energy and Montana’s Public Service Commission.

The two bills present starkly different ideas about how NorthWestern should acquire electricity — and, indirectly, what role fossil fuels should play in the company’s energy portfolio.

House Bill 99, sponsored by Rep. Denise Hayman, D-Bozeman, would require NorthWestern to solicit competitive bids when seeking new sources of electricity, ending the current policy by which the utility seeks approval from the PSC prior to investing in new supplies. 

“Currently the situation we have with NorthWestern Energy is they get an idea to build a plant, and they get to go out and commit the ratepayers to incredible amounts of money just because they think it’s a good idea. There’s no oversight,” Hayman told Montana Free Press. “There isn’t any business out there that would be given free rein like that.”

The policy can often result in NorthWestern overpaying for resources, said Roger Koopman, a former Republican member of the PSC whose term ended in January. Koopman worked with an interim committee to draft the bill. 

The current PSC did not weigh in on the bill. The commission, which is elected, regulates how much utility companies like NorthWestern are able to charge customers. But because NorthWestern is a monopoly, the company is guaranteed a certain rate of profit. That gives the company incentive to spend more money, because the overall profit will be higher, Koopman said. 

“It perversely rewards the utility for paying too much,” Koopman said.

Without seeking competitive bids, the company can project that an asset it wants to purchase is worth more than its value on the open market, he said. “When the projection is wrong, guess who pays? The ratepayer, the ratepayer, the ratepayer, the ratepayer.”

This bill would change that process by ensuring that the company seeks bids, which Hayman called “business 101.” In today’s market, investing in renewable energy is often cheaper than developing fossil fuel resources, but the law doesn’t mandate that the utility company invests in renewable energy, Hayman said.

Alan Olson, executive director of the Montana Petroleum Association and a former Republican legislator, said it makes sense for the utility to have the tool Hayman’s bill would ban. 

“Pre-approval is a necessity,” Olson said. “You’re not going to go to the bank and buy a house without pre-approval. You’re not going to buy a car without pre-approval.”

David Hoffman, director of government affairs for NorthWestern Energy, agreed that the company needs the tool of pre-approval in order to purchase new assets. Otherwise, the company will have difficulty making acquisitions. And the company currently needs more production capacity because it does not, on many occasions, produce enough energy to meet demand. He said the company can reliably count on about 500 Mw of energy supply — 250 Mw from hydroelectric generation and 220 Mw from Colstrip. He said the company’s 500-plus Mw of wind energy produces only about 36% of capacity.

At peak times, that can mean the company is producing less than 50% of its needs.

“NorthWestern Energy is capacity-short,” Hoffman said. “The region is capacity-short.”

Hoffman also said that without pre-approval, the company will have trouble acquiring new renewable sources of energy, making it difficult for cities like Missoula, Helena and Bozeman to meet their municipal renewable energy goals. He said NorthWestern’s energy portfolio is currently 67% carbon-free, and plans to be 90% carbon-free by 2045.

But Anne Hedges, director of policy and legislative affairs for the Montana Environmental Information Center, called that projection of difficulty is a scare tactic. She said other utilities in the region are able to purchase new energy-generating assets without pre-approval.

“It really isn’t about whether NorthWestern is going to go carbon-free or not,” Hedges said.

Instead, she said, the bill “removes the training wheels” for the company, requiring it to do more work to save Montanans money.

“This just forces the utility to come forward with the best possible deal it can negotiate before it comes to [the] commission,” Hedges said. 

Other groups supporting the bill include the Northern Plains Resource Council, the Sierra Club and Montana Health Professionals for a Healthy Climate. Jason Brown, of Montana Consumer Counsel, a constitutionally created group that works on behalf of ratepayers, said the organization has long opposed pre-approval because it shifts normal business risks from utilities to ratepayers.

The second bill considered by the committee was House Bill 245, proposed by Rep. Larry Brewster, R-Billings, and supported by NorthWestern.

The bill proposes speeding up the process for purchasing new electricity supplies, requiring more explanation for PSC denials, and changing the factors the PSC must weigh when considering a new source. 

Brewster said the bill’s goal is to help streamline the approval of new projects, requiring the PSC to issue a decision within 45 days and provide more clarity to the commission’s decision making. The bill would also require commissioners to promote utility ownership of electricity sources and furtherance of the state’s economic interests.

“It would look at things besides just the interest of NorthWestern Energy and the ratepayer, but the interests of Montana altogether,” Brewster said.

Such consideration would favor development of energy-producing projects in Montana, a point stressed by many fossil fuel interests, including the Montana Petroleum Association, the Treasure State Resources Association and the Montana Association of Gas and Coal Counties. The AFL-CIO also supported the bill, saying it would benefit union members.

Other groups, including the Sierra Club, Friends of Two Rivers, the Montana Environmental Information Council and Northern Plains Resource Council, opposed the change.

Robin Arnold, an analyst for the PSC, said the elected body strongly opposed the bill. Arnold said the current system is working, and the group sees no need to change it. She said the PSC is already required to explain its decisions in detail.

Arnold said the commission’s job is to balance the utility’s interest with that of the public, and that  HB 245 would shift that balance in favor of the utility.

“It shifts the burden of proof from the utility to the commission,” Arnold said.

In addition, the bill’s expedited requirement that decisions be delivered in 45 days would create more work for the commission, without giving it more resources. Arnold said decisions are currently required in 45 days, but the commission has some wiggle room to finalize documents.

The bill “would push everything up a week or two, most likely,” Arnold said.

Brown, of Montana Consumer Counsel, said the proposal raises a question of whether the state wants to trade higher utility rates for promotion of the state’s economic interests and creates a difficult balancing act for the PSC. If enacted, the change would likely lead to higher electricity rates for consumers across the state.

“At the end of the day, consumers want to feel confident they’re getting a fair price for their utilities,” Brown said.

No action was taken Wednesday on the bills.