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For five years in row, NorthWestern Energy has been given a pass for not complying with a state law requiring the utility to build or buy renewable energy projects for its generation lineup.

The latest waiver came last month as Montana’s Public Service Commission issued a final order forgiving the state’s largest electricity and gas provider for not living up to the law in 2015 and 2016. NorthWestern also has not made good on the law in 2017, nor 2018 so far, but waivers for not doing so come years later.

At issue is Montana’s law that regulated utilities invest in Community Renewable Energy Projects, or CREPs. The law is supposed to spur construction of smaller renewable energy projects across the state, as part of a bigger plan requiring utilities to get a small percentage of their electricity from renewable energy projects.

The law has been on the books since 2005 with a current goal of getting 75 megawatts of energy from CREPs. NorthWestern is on the hook for 65.4 megawatts from CREPs. Montana’s other regulated utility, Montana Dakota Utilities, is responsible for the remaining production and met its obligation years ago.

But the state’s all-Republican Public Service Commission isn’t a fan of the law and mustered enough votes in September to grant NorthWestern its fourth and fifth waivers, even as two commissioners acknowledged ignoring state law was something the PSC doesn't have the power to do.

“The reality is, the law does require the commission to consider whether a utility has taken all reasonable steps within its control and if we find they have not, the commission shall impose a penalty,” Commissioner Travis Kavulla said before the committee vote.

In writing a dissenting opinion for the final order, Kavulla noted that in 2015 and 2016 NorthWestern made no real attempt at developing Community Renewable Energy Projects. The utility has routinely issued a request for bids for CREPs with the requirement that they begin delivering electricity within about 18 months. The time from bid to finished product isn’t long enough, Kavulla wrote, and NorthWestern knows it. The utility has previously told commissioners that getting a project from bid to completion takes two full years.

Once a bidding process fails to produce a CREP that can be completed 18 months later, NorthWestern moves on to the next year and restarts the bidding process. That’s unreasonable, Kavulla said, given that the requirement for CREPs keeps rolling forward. A project from one year that didn’t meet the 18-month requirement would help the utility meet the law the next year if NorthWestern stuck with it.

There’s more than one way for a utility to meet Montana’s CREP law. NorthWestern could build a renewable energy project, like a wind or solar farm. The projects can also be developed by a third party, provided they include a significant amount of local ownership.

Commissioner Bob Lake, of Missoula, who voted to grant NorthWestern its waiver, said before voting that the local ownership requirement stemmed from expectations that Anaconda or Darby might build a wood-burning power generator to thin excessive fuel in nearby forests. Those wood projects never materialized, said Lake, who was in the Legislature when the CREP law was written. The local ownership has proven problematic since then.

But the thought of NorthWestern buying an existing project from someone else didn’t make sense to Billings Commissioner Tony O’Donnell, who joined Lake in giving NorthWestern a pass. If the CREP already exists, O’Donnell reasoned, how could NorthWestern buying it promote renewable energy?

“It doesn’t advance the existence of renewables. It doesn’t advance any of the community renewable standards in terms of the community,” O’Donnell said. “It doesn’t really change anything. So a suggestion like that simply would suggest it is a shell game.”

O’Donnell said NorthWestern shouldn’t even have to attempt to comply with the law, which he said was badly constructed. He said giving NorthWestern a pass would send a message to the Legislature that it should eliminate the Community Renewable Energy Project law and perhaps try again.

“Commissioner O’Donnell, hear me now,” said Roger Koopman, PSC commissioner from Bozeman. “We cannot flout the law. We do not have the authority to nullify law because we think it’s bad law. That is not our job, or our authority.”

There have been proposed CREPs in the Billings region that proceeded as non-CREP projects after failing to pass muster with the PSC, namely the Greycliff Wind project between Big Timber and Reed Point. Greycliff was rejected for not having enough local ownership. The 12 wind turbine project was later sold and developed and now provides electricity to NorthWestern. It was the first wind project to tap into a 50-mile stretch along the Yellowstone River between Livingston and Columbus that’s now proving to be fertile ground for wind energy development.

There are CREP projects on NorthWestern’s books. The company continues to once a year issue requests for bids.

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But the challenges for making CREPs work are real, said Butch Larcombe, NorthWestern spokesman. In addition to the challenges raised by Lake, CREPs also have to produce electricity at a price equal to the NorthWestern’s marginal cost of producing the electricity itself, which is what’s known as avoided cost.

“Local ownership and avoided costs, those two pieces have been very difficult for us to get around,” Larcombe said.

Buying projects is part of the NorthWestern strategy, Larcombe said. The utility bought a 10 megawatt Two Dot Wind Project with CREP compliance in mind. Other projects on NorthWestern’s CREP books include Turnbull Hydro, a small project near Fairfield; Flint Creek Hydro in Granite County; and Gordon Butte Wind farm near Judith Gap.

Gordon Butte has plans to add 9 megawatts of electricity generation, basically doubling its production. NorthWestern hopes to add the generation to help comply with the CREP law, Larcombe said, provided the PSC thinks the new generation qualifies.

Renewable energy advocates see the CREP law as a way to advance green energy in Montana. When the CREP law isn’t met, they want the PSC to issue fines, not waivers.

Brian Fadie, of the Montana Environmental Information Center, said the PSC could have issued $1.2 million in fines this month. It’s money that would have come from NorthWestern, not its customers.

Fadie estimates the four CREP projects on NorthWestern’s books have created 87 construction jobs and come with $41.8 million in Montana investment.

There are companies willing to create CREPs for NorthWestern if the company is making all reasonable steps to comply, Fadie said.

“Every year, they issue these requests for proposals. And the bids come in and they always get enough bids. Developers are looking to build these projects,” Fadie said.

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