HELENA – A federal commission says NorthWestern Energy overcharged large electric customers in Montana by millions of dollars for transmission “regulation” service and must repay them.
The company, however, strongly disputes the ruling and said Friday it will examine how it can overturn it.
“We don’t think we owe anybody a refund,” said NorthWestern Energy spokesman Butch Larcombe. “We don’t agree with the decision and are exploring our options as to what the next step may be.”
NorthWestern said it has set aside $27 million in “cumulative deferred revenue” that could finance a refund to affected customers, which include large, industrial plants and electric co-ops. Yet Larcombe said it’s too early to say what the exact refund may be – if NorthWestern has to pay it.
“We’re hoping it’s not going to have a significant impact,” he said.
Larcombe also said the case affects large, industrial customers that pay for transmitting power over NorthWestern lines, and shouldn’t affect retail electric customers like homeowners and commercial businesses.
However, an attorney for the large customers said Friday they warned in 2008 and 2011 that NorthWestern’s retail customers should pay a larger share of the disputed power transmission costs – and the federal ruling from last week essentially upheld their proposed cost model.
The April 17 ruling by the Federal Energy Regulatory Commission affects the rates that NorthWestern charges for “regulating” power from its Dave Gates Generating Station, a 150-megawatt, natural gas-fired power plant near Anaconda.
The plant, which came online in 2011, produces electricity that keeps NorthWestern’s power transmission system in constant balance between supply and demand.
State regulators had approved a rate structure that charged the large, transmission-only customers – co-ops and industrial plants that bought power elsewhere, but moved the power over NorthWestern lines – for a portion of the cost of the Dave Gates plant.
The transmission-only customers objected to the structure in 2010 and took their case to FERC. A FERC administrative law judge ruled in their favor in September 2012 and the full FERC upheld that ruling last week.
Thor Nelson, a Denver attorney representing the large industrial customers, said they believed NorthWestern allocated too much of the plant’s cost to the transmission customers, including an improper charge for a portion of the power that ended up flowing back for use by retail customers.
The improper charges resulted in millions of dollars a year in overcharges for the industrial customers starting in 2011, he said.
Larcombe said FERC’s decision shows a “fundamental misunderstanding of how our business operates and what the Dave Gates Generating station is.”
Power produced by the Anaconda plant primarily serves those who are using the transmission system, and very few retail customers, he said.
Nelson said if NorthWestern decides to ask for a rehearing or appeals the case, it still has to pay the refunds – unless FERC specifically allows the company to avoid it for now.