NorthWestern Energy bill moves toward final approval in Senate

Senate Bill 379, which was referred to as a “wish list for NorthWestern Energy” by Public Service Commissioner Tony O’Donnell when the PSC voted in late March to oppose it, passed a critical second-reading vote this week 30-20. All Senate Democrats opposed it, and all Senate Republicans except Brad Molnar, R-Laurel, supported it. 

The measure has been amended since it was first heard by the Senate Energy and Telecommunications Committee, but most of its core provisions are intact.

SB 379 would allow a utility that acquires coal-generated power generation capacity to fully recover any undepreciated value and associated remediation costs from energy consumers. That would shield companies like NorthWestern Energy from risks associated with buying those assets. It would also allow the utility to recover a rate of return based on an asset’s book value regardless of the actual purchase price, a scenario that recalls NorthWestern’s now-abandoned proposal to acquire 25% ownership of Colstrip’s Unit 4 from Washington-based Puget Sound Energy for $1. According to a PSC staff memo on the bill, energy consumers could be on the hook for $267 million in stranded costs if it passes.

NorthWestern Energy drafted the bill and Sen. Steve Fitzpatrick, R-Great Falls, is sponsoring it. Fitzpatrick is the son of John Fitzpatrick, who served as NorthWestern Energy’s lobbyist for many years prior to his retirement in 2016.

The original version of the bill heavily restricted the PSC’s ability to regulate utilities with coal-fired assets, but some of that language is softened in the current version. The previous version read, “the commission shall allow an electric utility … to lease or purchase one or more coal-fired units.” The version the Senate voted on Tuesday reads “the commission may allow an electric utility to … lease or purchase one or more coal-fired generating units.”

Sponsor Fitzpatrick introduced an ultimately unsuccessful amendment to the bill that would make PSC staff memos confidential, arguing that the memos are “being weaponized in legal proceedings.”

Sen. Mary McNally, D-Billings, disputed that characterization of the amendment.

“I think it’s pretty clear that the staff assessment on [SB 379] was not necessarily favorable,” she said. “They are a public agency. It’s very valuable for the public to get more insight into bills like this [with] costs that are potentially coming to consumers.”

Fitzpatrick’s amendment ultimately failed 25-25.

McNally, along with Bozeman Democratic Sen. Chris Pope and Molnar, expressed concern about the bill’s impact on Montana residents and businesses. 

“I don’t know if any of the rest of you have been getting emails,” McNally said. “I’ve been absolutely swamped by emails from ratepayers all over the state who do not want any part of this.”

McNally said that even with amendments, the measure “gives a blank check to the utility to do pretty much whatever it wants in Colstrip moving forward. … There’s no exposure to shareholders. This bill is saying, whatever happens, the ratepayers are going to pay for it.”

She then went on to read a message she said she received from a former director of the Montana Department of Commerce, who compared the bill to the state’s energy deregulation of the late 1990s, which removed the state’s competitive business advantage previously afforded by Montana’s low energy prices.

As of Wednesday morning, Legislative Services has tallied 754 comments in opposition to SB 379 and 36 in favor.

Molnar expressed concern that the bill does nothing to ensure the continued operation of Colstrip, because cost recovery is not tied to plant operation. He said NorthWestern’s shareholders have consistently expressed a desire to close the plant by 2030 and switch to other energy sources. If this measure passes, he said, ratepayers will continue to pay for the plant until 2042 “though they haven’t gotten a spark since 2030.”

Pope also incorporated economics in his argument. He said an assessment by Montana Consumer Counsel found that natural gas outperforms coal when it comes to the price of energy coming off the grid. He said that as of the assessment’s release in 2016, natural gas cost consumers about $43 per megawatt hour of energy delivered. In contrast, coal cost $75 per megawatt hour, he said.

Sen. Duane Ankney, R-Colstrip, pushed back against Pope’s assessment of the energy market and Molnar’s characterization of NorthWestern’s plans for Colstrip. Ankney said the cost of natural gas is volatile and often quite expensive. He maintained that building a new natural gas plant would go into the rate base just the same as a coal-fired plant. He also said that most of the opposition was centered on “a boatload of ‘ifs’” and that he has no reason to believe NorthWestern Energy would do anything other than continue to operate Colstrip as it has.

SB 379 is scheduled for a procedural third reading before the Senate Thursday morning. If it passes, it will move to the House for consideration.