Missoula District Court Judge Jason Marks ruled this week that a lawsuit challenging the state’s pre-approval statute can proceed. In his order, Marks denied NorthWestern Energy’s motion, which it filed with support from Montana Attorney General Austin Knudsen and the Montana Public Service Commission, to dismiss the lawsuit.
At issue is the constitutionality of the state’s pre-approval statute, which allows a utility company to pursue PSC approval of power-generating resources before the company has purchased or begun constructing them. Opponents of the statute say it insulates utility companies from the financial repercussions of bad business decisions by keeping captive ratepayers on the hook for costly investments, even if they’re ill-advised.
The statute has come into sharp focus in recent months following NorthWestern Energy’s announcement that it plans to build a 175-megawatt natural gas plant in Laurel that’s expected to cost more than $286 million.
According to Montana law, once the PSC — the elected body that provides regulatory oversight of utility companies — has approved the acquisition of a new power-generating asset, it can’t “subsequently disallow the recovery of costs … based on contrary findings.” The law was passed by the Legislature in 2003 to help the then-financially shaky NorthWestern Energy acquire financing for power-generating assets. (The utility had recently undergone bankruptcy and was struggling to obtain project financing through more traditional means.)
The plaintiffs are a trio of Missoula residents — Eric Huseth, Abigail Huseth and Jerome Walker — joined by 350Montana, a group that advocates a transition from fossil fuels to renewable energy in response to climate change.
The plaintiffs argue they have grounds to bring the lawsuit because they stand to suffer economic injury in the form of higher electricity bills if NorthWestern, the South Dakota-based company that serves two-thirds of the state’s energy consumers, is allowed to proceed with plans to build the Laurel Generating Station.
They say the state’s pre-approval statute confers economic advantage to NorthWestern and runs counter to Article 2, section 31 of the state Constitution, which prohibits the Legislature from granting “special privileges, franchises, or immunities,” and Article 5, section 12 because the law benefits only NorthWestern specifically.
Attorney Monica Tranel, representing the plaintiffs, said NorthWestern should finance the Laurel project independently — without obtaining pre-approval from the commission — rather than rely on ratepayers to guarantee the company the recovered costs of the project. She said building a natural gas plant when “climate change impacts are in front of us” is irresponsible from both financial and livable climate perspectives.
“They are asking Montana consumers to take on significant financial expense that their management and shareholders should take on,” Tranel said.
Asked to provide comment on the judge’s order, NorthWestern Energy spokesperson Jo Dee Black said in an email that the company is reviewing the order.
In its filings, NorthWestern argued that what members of 350Montana pay for electricity is not germane to the group’s purpose and that its members therefore don’t have standing to bring the lawsuit. The utility company further argued that the injuries are too general and widely shared to confer standing. Both NorthWestern and the state also said the lawsuit is premature given that NorthWestern’s application to build the Laurel Generating Station is still pending before the PSC.
The court disagreed with the defendants on both points. It found that the question at stake is ripe for judicial consideration as it’s “largely a question of law,” and that the plaintiffs have standing to proceed with their claim.
“To the extent that hardship can be foreseen, considerable sums of money appear to be at stake, given the prospective purchase of significant assets and concomitant rate increases,” Marks wrote in the order. “Generally, the Court presumes that avoiding unnecessary costs to all parties is beneficial and can be realized by addressing constitutional issues sooner rather than later.”
Tranel said she expects the court to hear arguments on the merits of the lawsuit itself in November.
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