PSC backs bill that would undercut its authority to regulate Colstrip-related costs for consumers

Posted at 5:37 PM, Mar 18, 2019
and last updated 2019-03-18 20:20:59-04

HELENA — A majority of the state Public Service Commission Monday threw its support behind the controversial bill designed to help NorthWestern Energy buy an additional part of the Colstrip 4 power plant, to keep it operating well into the future.

The PSC, going against the recommendation of its own staff, voted 3-1 to support Senate Bill 331, which says the commission must allow NorthWestern to pass on to ratepayers certain operating costs of the plant — without PSC review.

Commission Chairman Brad Johnson, R-East Helena, said NorthWestern’s purchase of an additional 150 megawatts from Colstrip 4 would provide needed power for the company’s 360,000 Montana electric customers and insulate the plant from political forces trying to shut down the coal-fired power generators.

Public Service Commission Chair Brad Johnson

“The risks of leaving Unit 4 exposed to the kind of incredibly premature closure that we’re seeing with (Colstrip) 1 and 2 represents a far greater risk … to the ratepayers than does the acquisition by NorthWestern of this additional 150 megawatts,” he said.

But Commissioner Roger Koopman, R-Bozeman, the sole vote against supporting the bill, said it sets a terrible precedent for undercutting the PSC’s authority to review utility costs, at the behest of a single utility that wants to buy power and pass on those related costs to ratepayers.

“If we believe in this bill, then we don’t believe in the PSC,” he said. “The Legislature might as well go to work creating something new to their liking, because this bill is a denial of what we are here to do.”

Public Service Commissioner Roger Koopman, R-Bozeman

Commissioners Bob Lake, R-Hamilton, and Randy Pinocci, R-Sun River, joined Johnson in voting to support SB331. Commissioner Tony O’Donnell, R-Billings, wasn’t present for the vote.

SB331, sponsored by Sen. Tom Richmond, R-Billings, has its first hearing Tuesday before the Senate Energy Committee.

The bill is the second version of a proposal that would guarantee NorthWestern’s recovery of certain costs — if the company is able to buy a portion of the Colstrip plant for $1, from another co-owner. NorthWestern has confirmed it’s negotiating the purchase from an owner who wants to abandon the coal-fired power plant, but hasn’t identified who it is.

Colstrip 4 is co-owned by NorthWestern and four utilities based on Washington and Oregon. Colstrip 1 and 2 are scheduled to shut down by 2022, but Colstrip 3 and 4, the larger, newer plants, have no current shutdown date.

Under SB331, if NorthWestern buys the 150 additional megawatts for $1, the company can recover from ratepayers up to $40 million in operating costs over the next five years. The bill also says if Colstrip 4 is closed before 2042, NorthWestern gets to charge ratepayers for all of the plant’s remaining depreciation and cleanup costs.

PSC rate analyst Robin Arnold said Monday that if the plant closed in 2027, the leftover depreciation costs would be $267 million, or about $721 per NorthWestern customer.

The staff memo, distributed to commissioners last Friday, said the PSC should oppose SB331 because it “disrupts the regulatory balance between NorthWestern and its customers by guaranteeing investment returns to the utility, while transferring all related risk to ratepayers.”

The memo also said the bill “erodes established fundamental ratemaking practices by passing direct costs directly through to customers without any review of prudency.”

Arnold also said the bill’s sponsor, Sen. Richmond, may offer amendments on Tuesday that could allow some additional PSC review of the costs passed on to ratepayers.

Koopman said he’s concerned that SB331 could contain a “perverse incentive” to shut down Colstrip 4 earlier than necessary, because it guarantees that NorthWestern would still recover its depreciation and other costs in the event of an early closure.