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Again, Supreme Court finds PSC unlawful in solar dealings

Again, Supreme Court finds PSC unlawful in solar dealings

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Another Montana solar project has won a state Supreme Court ruling against NorthWestern Energy and the Montana Public Service Commission, which “chose unlawful methodologies” to render a solar farm near Billings uneconomical.

In an unanimous decision, the Montana Supreme Court ruled that state energy regulators broke the law in setting terms that made the MTSUN solar farm northwest of Billings uneconomical. Tuesday’s ruling was the second time in a month the Justices ruled against the PSC and the state’s largest monopoly utility. The state’s consumer advocate, the Montana Consumer Council, was also a loser in the case.

It was the PSC that took most of the criticism for setting the terms of the purchase power agreement, or PPA, between NorthWestern and MTSUN.

“In reviewing the record and considering each component of the PSC’s orders, it is clear that at nearly every step of setting the terms of MTSUN’s PPA, the PSC chose arbitrary and unlawful methodologies that resulted in deflating the economic feasibility of MTSUN’s project,” wrote Chief Justice Mike McGrath.

Developers now expect the project, five years in the making, to move forward next spring under terms set by the court.

“One of the things that gets lost in the shuffle, is that we have a long-time Billings, Yellowstone County, rancher who took a flier on us five years ago. And finally, he and his family are going to see payments related to leasing his property for 25 years,” said Mark Klein, of Broad Reach power. “To me, this is great for the longtime farmers and ranchers of rural Montana.”

At 480 acres, MTSUN would be the second largest solar farm to advance. The 80-megawatt development on a plateau west of Alkali Creek Road would generate enough electricity to power about 14,400 homes. The power from the project will see prices in the low $40 per megawatt hour range, cheaper than what NorthWestern customers pay for the electricity from the utility’s dams or its own coal-fired power generated at Colstrip

NorthWestern has argued the solar power, and renewable energy in general, isn't available at peak demand times, which is why the utility wants to pay less for that power.

The Supreme Court Ruling affirms a lower court’s conclusion that the Public Service Commission knew it was harming solar projects when it shortened power purchase contracts between NorthWestern and solar developers from 25 years to 15 years.

One commissioner, Bob Lake, had been caught on a hot mic acknowledging the contracts would harm the solar industry. Republican Lake of Hamilton represents the district that includes Missoula.

Additionally, the High Court faulted the PSC for making several unlawful steps in the way it determined the price NorthWestern would pay MTSUN for electricity.

The PSC regulates utilities in Montana and is made up of five elected representatives, currently all Republican, from across the state. A call to the PSC's main number rang but did not go to voicemail.

At issue is the PSC’s compliance with the federal Public Utility Regulatory Policies Act, or PURPA. For the last 40 years, PURPA has required states to set prices and contract lengths to help the development of alternative energy projects. In Montana, some of the oldest PURPA projects include a power plant that burns petroleum coke from Billings oil refineries and another that burns waste coal from the Rosebud Mine. 

Only in last decade or so have wind and solar projects emerged as the primary energy developments seeking contracts and prices negotiated in Montana under PURPA rules.

Utilities tend to balk at having to award contracts to PURPA projects. The federal law requires a hookup and dictates pricing terms. Larger facilities that qualify for PURPA treatment get a price for their power that’s equal to the utility's marginal cost to produce the power itself. This is known as “avoided cost.” When the developer and the utility fail to reach an agreement on what the avoided cost price is, the Public Service Commission settles the matter.

Smaller developments that qualify under PURPA, projects that are 3 megawatts or smaller in size, get a price preset by regulators.

In the last month, the Supreme Court has faulted the PSC both for the contract lengths it has set, as well as the prices established by regulators.

Making its case to the Supreme Court in May, the PSC argued that it was lower court judge James Manley who was biased, not the commission. They asked the Supreme Court to throw out Manley's decision. Instead, the High Court backed up the District judge.

In Supreme Court, NorthWestern Energy warned of a "land rush for new (qualifying PURPA projects), especially solar ones," if the  justices backed Manley's decisions.

Last month, Chief Justice McGrath called NorthWestern's claims of consumer-harming solar prices, a tired trope.

There is one solar farm larger than MTSUN in the works. In June, Basin Electric Cooperative issued a contract for an 1,100-acre solar farm near Baker in southeastern Montana. Cooperatives aren’t regulated by the state. The Baker solar farm is not a PURPA project.

The Missoulian's Seaborn Larson contributed to this report

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