HELENA – The state Public Service Commission on Tuesday decided to shop for consultants to help it evaluate whether NorthWestern Energy’s planned $900 million purchase of 11 hydroelectric dams in Montana is a good deal for the utility’s customers.
NorthWestern, the largest electric utility in Montana, announced a month ago it has agreed to buy the dams from PPL Montana to provide long-term power for its 330,000 Montana electric customers.
But the purchase – the cost of which would be passed on to NorthWestern’s Montana ratepayers – must be approved by several regulators, including the five-member PSC.
The commission, which regulates electric, gas, telephone and water utilities, agreed Tuesday with a staff request to look into hiring a consultant with expertise on a new software program NorthWestern is using to “model” the costs of the purchase.
Will Rosquist, a rate analyst with the PSC, said staff is unfamiliar with the software, which contrasts the long-term costs for ratepayers of buying the dams with alternative sources of power that NorthWestern could acquire.
“We haven’t had the experience of seeing the (software’s) outputs or interpreting them,” he said. “Therefore it might be helpful to have someone with expertise in the modeling.”
Commissioner Travis Kavulla, R-Great Falls, also convinced fellow commissioners to authorize staff to look into hiring a separate consultant who would examine the long-term maintenance costs of the dams.
The costs of keeping the hydroelectric plants in good working order over the next 30 years is another “great unknown” of the purchase, Kavulla said, and the PSC should know those costs as it evaluates both the software modeling and the impact to ratepayers.
NorthWestern plans to apply to the PSC in December for “pre-approval” of the purchase, after which the commission has just 45 days to decide whether the application is adequate.
“I don’t think we can really afford to wait on some of this,” Kavulla said. “If we’re going to have consultants on this, then they really need to be in place before the application lands in our lap.”
Rosquist also noted that the cost of the consultants would be paid by NorthWestern, but that the company can include that cost in rates.
Once the commission decides the application is adequate, the PSC begins a months-long investigation and hearing process on whether to approve the purchase. That process is expected to be completed later next year.
NorthWestern officials have said they expect the cost of buying the dams will increase electric rates by about 5 percent, and then mostly stabilize rates for years to come.
The dams have a capacity of 630 megawatts and, along with other power sources owned by NorthWestern, could produce enough electricity for most of NorthWestern’s customers during “light-load” periods, the company has said.
During peak times of electricity use, the company still would have to buy some power from the market.
The PSC must determine whether the purchase of the dams is in the public interest and will lead to “just and reasonable” rates.
The 11 dams are along the Madison, Missouri, Flathead and Clark Fork rivers in western Montana. They are the same dams that PPL bought from NorthWestern Energy’s predecessor, Montana Power Co., 14 years ago in the wake of utility deregulation in Montana.