House lawmakers heard first arguments Monday about a plan committing NorthWestern Energy customers to paying the utility $75 million as the company looks to buy more of the troubled Colstrip Power Plant.
The proposal, which two weeks ago passed the Senate on a mostly party-line vote, drew two hours of testimony from witnesses, some arguing Montana risked brownouts if NorthWestern didn’t up its share of Colstrip ownership. Senate Bill 331 comes as four of the power plants other five owners face pressure in Oregon and Washington to abandon Colstrip. Some owners face climate changes concerns over coal. One, PacifiCorp, says coal power is uneconomical, unable to compete with cheaper natural gas and renewable energy.
The Montana Consumer Counsel, the state-appointed advocate for monopoly utility customers, identified power from Colstrip Unit 4 as some of the most expensive electricity for which NorthWestern Energy customers pay, at $76.87 a megawatt hour, compared to $21.77 a megawatt hour for market power during 12 months studied, ending in June 2017.
NorthWestern owns slightly less than a third of one unit of the power plant. The remaining shares are held by Oregon-based PacifiCorp and Portland General Electric; Washington-based Puget Sound Energy and Avista Corp. Pennsylvania-based Talen Energy operates the power plant and owns a share in three of Colstrip's four units.
The bill’s sponsor, Sen. Tom Richmond, R-Billings, told the House Energy, Technology and Federal Relations committee that NorthWestern, a South Dakota corporation with 370,000 ratepayers in Montana, hopes to take advantage of the other owners’ exit plans by acquiring Colstrip shares at bargain basement prices. NorthWestern seeks an additional 20% ownership share of Colstrip Unit 4, boosting its overall stake in that unit from 30% to 50%.
“The presumption here is that West Coast utilities are in the position of divesting from coal-fired power," Richmond said. "They’re under direction from their own public service commissions to accelerate depreciation and close, believing they have an incentive to leave Colstrip facility. This bill allows — but does not require — the regulated utility to purchase a share of a West Coast utility that is leaving the area for $1.”
But the bill also prevents Montana’s Public Service Commission from scrutinizing the $75 million bill increase for NorthWestern customers. The PSC, which balances customers’ legal right to a reasonable rate against NorthWestern’s right to a return on investment, is prevented from doing so by SB 331. The provision prompted Public Service Commissioner Roger Koopman to warn pro-NorthWestern lawmakers from engaging in crony capitalism.
“If you believe that corporate welfare, consumer subsidies or monopolies — if those things are the way to encourage and promote free enterprise and to help the people of Colstrip, then this is obviously a bill you would like,” said Republican Koopman, the commissioner from Bozeman. “But if you believe that sound public policy is based on sound economics, and sound economics is based on freedom and free markets, not on government schemes that enrich a specific company at the expense of everyone else, then this bill, frankly, is a disaster. I think it's fair to note that NorthWestern always had the opportunity, and does now, to purchase more of the Colstrip assets. In fact if they’d done so five years ago Colstrip wouldn’t be in the economic position that it’s in now.”
In 2014, when NorthWestern was spending more than $800 million to buy Montana-located hydroelectric dams from Pennsylvania Power and Light, PPL had offered to add a share of Colstrip into the deal. NorthWestern at the time countered with a lower offer if it had to take on an increase stake in the coal-fired power plant.
Colstrip Sen. Duane Ankney, a Republican, said committing NorthWestern ratepayers to paying the $75 million would assure the utility had baseload power, that is mostly reliable electricity, to offset other less-constant electricity sources.
“Montana has made the mistake of continuously putting itself at the mercy of out-of-state entities that have little or no stake in this state," he said. "I mean, this goes back to 1864. It’s time that we learn from them mistakes and take steps to put more power over our energy future back into the hands of Montanans, and this will do it.”
Ankney said electricity rates should decrease during the 10 years NorthWestern customers are committed to paying $75 million in capital expenditures.
"Capital costs are those which increase the value of the plant and/or are needed to meet environmental regulatory safety or reliability requirements," said David Hoffman, a lobbyist for NorthWestern and its director of government affairs. "We have the need for replacement of the opacity monitor over the next five years, the need for replacement of the stack flow monitor, a need for replacement of the continuous particle monitor, the mercury monitor, the CEM monitor, new fire pump addition, some heavy equipment replacement, plant lighting replacement turbine overhauls for both the high pressure and low pressure turbines. I hope you get the drift, but if not we can provide more information specifically about what those capital costs are. What the don't include are the day-to-day costs, which are typically fuel, the cost of coal, the cost of wages, property taxes and things like that."
Other witnesses weren’t so sure the $75 million, paid out at about $8 million during the first five years before slightly decreasing, was a good deal.
Anne Hedges, of the Montana Environmental Information Center, testified NorthWestern’s capital expenditures for its current 30% share of Colstrip Unit 4 was about $4.5 million a year, according to what the utility has told the Public Service Commission. That the company expected $75 million in capital expenses for an even smaller share than it currently owns deserved scrutiny, she said, adding that it’s the kind of scrutiny the Public Service Commission is intended to do.
Jason Brown, attorney for Montana’s Consumer Counsel, pointed out that for the better part of the previous decade, NorthWestern owned no generation assets, and yet its customers never experienced brownouts.
The earliest the committee would take action on the bill is Wednesday.
There was a dustup among public service commissioners about whether to support SB 331.
Once on record supporting the bill, the Public Service Commission reversed course Monday morning and voted 2 to 1 to oppose legislation as amended. Commissioners Roger Koopman, of Bozeman, and Tony O’Donnell, of Billings, voted to oppose SB 331. Randy Pinocci, of Sun River, voted the to support the bill.
The results might have been different had PSC Chairman Brad Johnson, of Helena, or Bob Lake, of Hamilton, participated. Both earlier sided with Pinocci in endorsing SB 331 last month, but neither teleconferenced in for the Monday vote. Ankney read a statement from Johnson saying that the chairman tried to join the conference call but couldn’t.
As a result of the Monday morning vote, the PSC position went on the record in the House Energy Committee hearing as opposing the bill, which meant for the first time the PSC was in agreement with its expert staff who have held from the beginning that SB 331 was bad for NorthWestern Energy customers.
Specifically, Public Service Commission analysts have warned lawmakers that by voting SB 331 into law, the Legislature is allowing NorthWestern to skip the evidence-based process used by the PSC to determine whether customers will receive reasonable rates and reliable service.
Analysts did say that some earlier concerns have been amended out of Richmond’s bill. Early on, Richmond attempted to commit NorthWestern Energy customers to making payments years into the future on the company’s existing share of the power plant, regardless of whether Colstrip closed early. Customers are 10 years into a 34-year, $407 million payment plan for NorthWestern’s 30% share of Colstrip Unit 4.
Ten current and former public service commissioners signed a letter opposing the bill.
None of the Colstrip owners have indicated when they will exit the power plant. Puget Sound and Avista have made plans to be financially ready for closure by the end of 2027. PacifiCorp is obligated to stop delivering coal power to Oregon customers by 2030. Portland General Electric must stop using coal power by 2035. Talen Energy, after announcing in 2016 that it wanted to stop operating the power plant, has chosen to remain. NorthWestern plans to fully depreciate its plant share by 2042.
The Washington Legislature is considering a bill to end coal power use in the state by 2025.