NorthWestern Energy’s ‘historic’ rate increase request

This story is excerpted from the MT Lowdown, a weekly newsletter digest containing original reporting and analysis published every Friday.

The week before the Public Service Commission was set to hold a hearing on NorthWestern Energy’s proposed $120 million electricity and natural gas rate increase, the utility company announced it had reached a settlement agreement with four parties previously opposed to its proposal.

As a result, Montana’s elected, all-Republican utility board spent much of last week reviewing that settlement agreement in an occasionally tense public hearing rather than combing through the details of NorthWestern’s initial proposal to raise residential electricity rates by 25% and natural gas base rates by about $14 million, as previously planned. 

The parties that agreed to the settlement describe it as a compromise that will allow NorthWestern to adjust its rates to mirror the costs it incurs to meet the needs of its various customer bases. Proponents say the utility company’s costs have risen with inflation, just as other businesses’ have, and that the utility was overdue for a rate case.

According to NorthWestern Director of Regulatory Affairs Cynthia Fang, the company has put about $1 billion into capital investments since its last rate case, which was finally decided in late 2020, when the commission authorized the utility to collect a $6.5 million increase from electricity customers. In opening remarks, NorthWestern’s attorney Shannon Heim said the proposal before the commission balances the importance of securing the company’s long-term financial health with its goal of providing safe, affordable, reliable and sustainable service to its customers.

Other settlement proponents include Montana Consumer Counsel, a small state agency charged with representing consumer interests in regulatory matters before the PSC; the Large Customer Group, which includes customers with high power bills such as oil refineries, lumber company Idaho Forest Group and mining company Sibanye-Stillwater; Walmart, which incurs a seven-figure electricity bill annually to power its 14 Montana stores; and a coalition representing the interests of Northwestern’s large federal customers, including Malmstrom Air Force Base.

Opponents of the settlement argue that NorthWestern has proposed a “historic” rate increase that will fall almost entirely on the utility’s residential and small business customers at a time when many can’t afford to pay more for basic necessities like power and heat. Opponents representing climate and renewable energy groups also bristled at their exclusion from settlement talks, suggested that the increase NorthWestern is seeking reflects irresponsible financial decisions, and accused the shareholder-owned utility of failing to chart a considered and coherent course into the future. 

350 Montana, a nonprofit active on energy and climate issues, accused NorthWestern of disregarding climate change models and impacts and discounting the increasing affordability of renewable energy sources in its energy procurement decisions. (NorthWestern’s attorney countered that the settlement hearing isn’t the appropriate venue to explore climate change issues.)

During April 12’s proceedings, David Dismukes, an economist representing Montana Consumer Counsel, described the proposed increase as “unfortunate” but justified based on his analysis of the utility’s cost of service studies and revenue requirements. MCC said the settlement will serve the public interest and noted that NorthWestern will not be able to recoup construction costs of the $250 million Laurel gas plant — which is currently stalled by court order — until the plant comes into service because MCC negotiated the removal of a controversial “reliability rider” from NorthWestern’s original proposal.

Testimony from the Large Customer Group emphasized that its members have subsidized, and will continue to subsidize, smaller customers’ utility service, and noted that their own rates will rise as well.

350 Montana attorney Monica Tranel countered in filings and oral arguments that 93% of the $81 million increase for electricity service will fall on NorthWestern’s residential and small-business customers. Tranel argued that regular Montana ratepayer interests weren’t adequately represented in settlement negotiations and that the settling parties’ agreement discriminates against those small ratepayers. She asked the commission to scrap the settlement and engage all stakeholders in a more inclusive negotiation.

At one point in the hearing, Tranel referenced a comparison chart NorthWestern had prepared to illustrate customer electricity rates pre-rate case, under the interim rate increase the commission approved last fall, and under the terms of the settlement the PSC is evaluating. According to that chart, under the settlement terms residential rates will increase by 28%, as compared to nine months ago.

Heated discussion of the rate case wasn’t confined to the streamed and recorded proceedings in Helena — it spilled over into commissioners’ voicemails and inboxes. At one point during the proceedings, District 1 Commissioner Randy Pinocci said his constituents are reeling over the proposal.

“You listen to the voicemail on my cell phone, my home phone and my work phone here — I’ve never heard anything like it,” he said. “We absolutely have rate shock.”

Pinocci said he’s concerned the rate increases will threaten the viability of farming operations in his district, the state’s largest and most rural, given the high power demands of irrigation equipment. 

Settlement proceedings started last Tuesday and continued into Friday. The commission has nine months to issue a decision. If it rejects the settlement, it will continue to wade through the rate case filing NorthWestern submitted last summer.