NorthWestern Energy is pitching the state’s utility board on a 9.14% increase in natural gas rates, according to the terms of a settlement the utility reached with consumer representatives over a rate increase request NorthWestern filed in July.
The agreement doesn’t settle an open question about raising electricity rates to pay for the gas plant NorthWestern recently built in Laurel.
NorthWestern, a monopoly utility that provides electricity or natural gas service to approximately two-thirds of Montana’s residents, outlined the terms of the agreement in an April 15 press release.
The Montana Consumer Counsel joined some of the utility’s largest customers — among them Walmart, Stillwater Mining Company, Calumet, REC Silicon, and Malmstrom Air Force Base — in signing off on the settlement. In the coming weeks and months, the Montana Public Service Commission, the elected board that regulates shareholder-owned utilities, will scrutinize the settlement terms.
If the PSC authorizes the settlement, the average NorthWestern Energy customer using 65 therms of natural gas per month will see a $4.74 increase in their bill relative to what they were paying last July. Since the commission authorized a preliminary 8.4% rate hike equivalent to $4.38 a month for the average customer in November, most customers have already been paying the lion’s share of the proposed increase.
The parties also landed on a proposal for an interim electricity increase of 4.2%, equivalent to $4.63 a month for an average customer. However, that rate excluded one of the most contentious pieces of NorthWestern’s proposal — recovering the company’s costs for a 175-megawatt utility-owned gas plant NorthWestern started building in 2022.
The Yellowstone County Generating Station has been feeding power to the grid since October, but the utility has been at odds with other parties over its plan to recoup its investment in the plant by incorporating construction costs and a profit margin into the “base rates” that are used to calculate customers’ monthly bills.
Groups such as Montana Environmental Information Center and NW Energy Coalition argue that the gas plant is more expensive and polluting than renewable energy sources and that the utility shouldn’t be able to recover cost overruns and expenses associated with lawsuits challenging the plant’s permit and construction.
NorthWestern has argued in filings before the PSC that the plant will allow the company to sell excess electricity to utilities in other regions, helping offset the plant’s approximately $310 million price tag.
In November, Public Service Commissioners rejected NorthWestern’s proposal to start recovering $58 million of its investment in the plant through a “bridge rate” that would have been in effect in the interim between its initial filing and the conclusion of the rate case. Over the past six months, NorthWestern has been able to recover its operating costs associated with running the plant, but not the 10.8% return on equity the company sought. Instead, the commission authorized a temporary 7.2% electricity rate reduction to account for uncommonly cheap natural gas and a shifting regional energy market.
Periodic rate cases are the mechanism regulated utilities like NorthWestern use to negotiate the rates the utility board lets them charge energy consumers. NorthWestern’s most recent request to recover an additional $164 million from its customers annually factors in the Laurel gas plant, increases to the utility’s annual property tax bill, investments in transmission lines and a return on its equity in power infrastructure.
Since the settlement in the current case was submitted to the PSC so close to the start of the rate case hearing — a quasi-judicial proceeding that adheres to many of the same standards used by state and federal judges — it’s unclear whether the hearing will begin on April 22 as planned.
NorthWestern has requested that the hearing proceed as scheduled to accommodate its experts’ schedules, but PSC President Brad Molnar indicated during the commission’s April 15 business meeting that keeping the established schedule could put the agency personnel reviewing the settlement in a time crunch to identify issues with the agreement and issue proper notice to the public.
The commission has not yet acted on NorthWestern’s formal request to maintain the April 22 start date.
