HELENA – Montana’s Public Service Commission wouldn’t vote for a $12.5 million annual rate increase for NorthWestern Energy customers last week – but the rate hike took effect anyway.
The increase for electric and natural gas ratepayers served by NorthWestern is required by state law, which says the utility can charge enough to cover what it pays in state and local taxes – mostly property taxes.
The PSC’s five members, all Republicans, refused to vote for the increase to protest the high level of taxes automatically passed on to Montana consumers.
“This is a fairly easy way (for the government) to generate tax revenue, without incurring the wrath of the taxpayer, by camouflaging it in the utility bill,” Commission Chairman Bill Gallagher, R-Helena, said in an interview this week.
If the PSC doesn’t act, state law dictates that NorthWestern’s entire requested rate increase to cover higher taxes is enacted.
In this case, the increase has been effective since Jan. 1, or three weeks after NorthWestern filed its request with the PSC.
An average residential electricity customer will pay about $15 more a year, or 1.4 percent, while the average residential natural gas customer will pay an extra $22 a year, a 2.2 percent increase.
NorthWestern officials said its property taxes account for about 10 percent of its rates.
“It’s not anything that NorthWestern earns anything from,” said NorthWestern spokeswoman Claudia Rapkoch. “We are simply collecting it from customers and paying it to the state of Montana (and local governments). It’s a cost of doing business.“
Much of NorthWestern’s property, such as power lines or other transmission equipment, is assessed at a 12 percent rate, which is the highest of any class of property.
Of the $12.5 million increase, only about $5 million is from actual tax increases levied on NorthWestern last year.
Gene Walborn of the state Revenue Department said the increases were caused mostly by assessments of new equipment and, in some cases, higher mill levies from various local governments.
The remainder of the increase occurred because NorthWestern underestimated its rates needed to cover its taxes in 2012. State law allows NorthWestern to collect the difference in the following year.
Commissioner Roger Koopman, R-Bozeman, wanted the PSC to require NorthWestern to inform its customers how much of its rates are needed to pay taxes.
The commission, however, declined to adopt his suggested motion. Gallagher said the rest of the panel felt it shouldn’t be issuing orders on the rate increase if it had failed to act on the increase itself.
“There is nothing more frustrating than to see a rate increase go into effect, that, by law, commissioners are powerless to stop,” Koopman said
The commission is supporting Senate Bill 138, which would extend a lower property tax rate to all new electric and gas generation and production equipment. The bill passed out of a Senate committee last week and is headed for the Senate floor.
Missoulian State Bureau reporter Mike Dennison can be reached at 1-800-525-4920 or at firstname.lastname@example.org.