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Value, future of Colstrip a flashpoint in NorthWestern’s $35 million electric rate-hike request

This is the first of a two-part series on NorthWestern Energy’s $35 million electric rate-increase request

HELENA — The future and value of NorthWestern Energy’s share of the coal-fired Colstrip 4 power plant have become a flashpoint in the company’s $35 million rate case before regulators — but the company says it shouldn’t be.

In the case before the Public Service Commission, a trio of environmental groups has filed testimony on Colstrip, saying NorthWestern’s 360,000 electric ratepayers should not continue to pay for an inflated value of the portion of the power plant supplies its customers.

“We think that customers have already been gouged, are already paying an inflated price for Colstrip,” says Anne Hedges of the Montana Environmental Center. “We don’t want that to continue; we don’t want it to get worse than it already is.”

But on Tuesday, a lawyer for NorthWestern told the state Public Service Commission it should strike all testimony in the rate case about the future or possible closure of the Colstrip plants.

“NorthWestern is trying to prevent the environmental groups from turning this rate case into a case about shutting down Colstrip,” said Ann Hill. “This is case is about the investments we’ve made and the expenses we incur, because Colstrip is still operating.”

NorthWestern, the state’s largest electric and gas utility, has asked the PSC to approve a $35 million annual increase for its electric rates — the first full rate case the company has filed in almost 10 years. If the full increase is granted, residential customers would see a 7.4 percent increase, or about $75 a year for the average homeowner.

Two weeks ago, the PSC granted a $10.5 million interim increase for NorthWestern while the case is being considered. The increase takes effect April 1.

The five-member commission will hold a hearing on the full rate request in May and decide the case later this year.

On Tuesday, the PSC held oral arguments on NorthWestern’s request to strike the testimony about Colstrip, filed by the environmental groups and others last month. Much of the testimony focused on the future value of the NorthWestern’s share of Colstrip 4, and how much of those costs should be borne by ratepayers.

NorthWestern purchased the share in 2008 and uses that power as part of its electric supply for customers. In the rate case, the company is valuing the plant at about $300 million.

But an expert for the Montana Environmental Information Center, a Helena-based group, said the true value of the plant share is closer to $100 million, or less, and that ratepayers shouldn’t be charged for the higher amount.

Hedges also told MTN News that charging ratepayers for the inflated value discourages development of cleaner, cheaper sources of power.

“We want to make sure that customers are protected from a monopoly utility wanting to gouge them and put more money into a failing resource, when in fact there are cheaper ways to generate electricity,” she said.

NorthWestern says the value of the Colstrip share was set by the PSC in 2008, with depreciation, and that the commission can’t go back and change that amount, simply because market forces have made the power or plant less valuable.

Hill, the NorthWestern attorney, said MEIC and the Sierra Club have made it clear they want to shut down Colstrip’s power plants, and that devaluing them in the rate case is a way to do that.

She also said allowing the testimony into the case would make it easier for the environmental groups to challenge the PSC’s final ruling in court, alleging that the commission ignored their arguments.

“That’s why it’s important to not let irrelevant testimony in the record in the first place,” she said.

Yet Chuck Magraw, an attorney for the Natural Resource Defense Council, said NorthWestern is mischaracterizing the group’s testimony and the law, which clearly allows the PSC to regulate all aspects of public utilities to ensure rates are “just and reasonable.” In this case, Colstrip is a factor, he said.

“The commission’s obligation is broad,” he said. “It is to vindicate the public interest and make sure that rates are just and reasonable. … The statutory scheme under which this commission operates is completely at odds with NorthWestern’s views on what this commission can or can’t consider.”

The PSC will decide within a few weeks whether to allow the testimony on Colstrip.

Next: NorthWestern is proposing a new rate for solar-powered homes, that has installers crying foul

Mike Dennison

Mike Dennison

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