Electricity pylons (Photo by Getty Images).
NorthWestern Energy said it is “under earning” and needs more money from customers, but the Montana Public Service Commission said Tuesday the materials it filed fail to meet the minimum standards to make the case.
For one thing, the utility didn’t provide its most recent quarterly balance sheets and income statements, according to a PSC staff memo. Additionally, the memo said:
- NorthWestern’s witness testimony about depreciated assets fell short,
- The utility didn’t explain the new way it’s coming up with its “cost of service,” and
- It didn’t break down its advertising expenses, which can’t all be claimed, among many other problems.
“The Commission has identified multiple instances where the application falls short of full compliance with the minimum filing standards and several instances where the application patently fails to substantially comply with those standards,” said the order from the PSC.
PSC staff recommended and commissioners agreed to send NorthWestern a notice it needs to turn in more information to comply with the rules and ensure the PSC can judge its proposal for higher rates, deemed by the utility to be critical, at least on an interim basis.
“NorthWestern will be irreparably harmed if the requests for interim base rates are not timely granted because NorthWestern will continue to lack the ability to earn its authorized return and timely recover its costs, which damages its financial integrity,” the company said in one of the documents that’s part of its application; it wants the PSC to approve an increase in interim rates starting Oct. 1, 2024.
At the end of July, NorthWestern touted an increase in net income in the second quarter of 2024 during the same period in 2023, “primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, and electric and natural gas retail volumes.”
It earned $31.7 million in income in the most recent quarter this year compared to $19.1 million the same quarter last year, according to a news release about its quarterly report.
“We are pleased to report solid earnings growth this quarter, a clear testament to our team’s dedication and hard work,” said Brian Bird, president and CEO, in a statement.
At their meeting Tuesday, commissioners voted 5-0 to support the staff recommendation for additional information from NorthWestern. A couple of commissioners also said they appreciated the staff’s analysis.
“I know that my constituents at least, and I suspect all of ours, would like us to turn over every stone in these rate cases,” said Commissioner Jennifer Fielder.
Commissioner Tony O’Donnell also praised the staff’s detailed work but noted NorthWestern has turned in subpar documentation in the past.
“This is not the first time that NorthWestern has made an application that our staff has found insufficient,” O’Donnell said. “This is not to point the finger at NorthWestern but to emphasize that our staff is very diligent at looking at conformity with regulations.”
Commissioner Annie Bukacek, however, said her constituents are interested in the best way to keep the lights on, and turning over “every stone” could be overkill at times.
“There is a point where regulation becomes government overreach,” Bukacek said.
In fall 2023, all commissioners voted to approve a significant rate hike for residential and small business customers — more than 20% for both.
The recent application from NorthWestern said the utility is submitting its proposal because it’s costing more to deliver services.
“NorthWestern’s current rates are no longer just and reasonable rates, as they do not recover NorthWestern’s current cost of providing electric and natural gas service to its customers,” the company said in a letter with its application. “Since the last rate review, filed in 2022, NorthWestern is expected to invest and place into service over $1 billion in electric ($874M) and natural gas ($174M) by the end of 2024 for our Montana customers.”
If the PSC approves NorthWestern’s application, it would increase electric rates 8.28% for a typical residential customer from $110.07 a month currently to $119.18 a month, and it would increase natural gas rates 16.98% from $51.89 currently to $60.73, according to a letter from NorthWestern.
However, as part of its application, NorthWestern is requesting an interim rate adjustment as well, and it argued an interim increase is critical for the utility. If approved, the interim rate would bump up an electric bill for a typical residential customer from $110.07 to $112.16, or 1.9%, starting in October.
“Crucially, NorthWestern faces irreparable financial harm without the ability to increase rates on an interim basis, subject to refund,” NorthWestern said in one of its filings.
The application from NorthWestern includes the methane-fired plant in Laurel, the Yellowstone County Generating Station, expected to be online sometime in the third quarter of 2024, according to NorthWestern. Its cost is estimated to be as high as $320 million.
The utility said it will buy less energy on the market as a result of the Laurel plant, and it is asking the PSC to approve a “bridge rate” that recognizes the value that facility will represent to customers.
The plant is controversial for a number of reasons. For one thing, advocates of renewable and affordable energy argue NorthWestern has ignored cheaper, cleaner alternatives in favor of a costly and polluting generation facility.
In 2021, NorthWestern withdrew a request that the PSC approve construction of the Laurel plant because the utility wanted to move quickly on the project. In its current application, NorthWestern said the plant is a “critical component” of its “diverse electric generation portfolio.”
But the PSC staff memo commissioners approved said NorthWestern’s application is “inadequate under the minimum filing standards.” Staff recommended and commissioners ordered the utility to file all supplemental testimony, statements, workpapers and exhibits within two weeks to comply, or by Aug. 20.
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