HELENA — After two days of discussion and debate, the Montana Public Service Commission has made its decision on NorthWestern Energy’s proposals to increase electric and gas rates. In the end, commissioners disallowed some, but not all, of the company’s contested proposals for increases.
In a statement Wednesday afternoon, the PSC said their decision is likely to lead to lower costs for consumers, as NorthWestern had previously raised rates on its own, based on its original request.
(Watch the video to hear more from the two-day PSC work session.)
NorthWestern, Montana’s largest utility, submitted its request for a rate increase in July 2024. The PSC held an eight-day hearing on the proposal in June. All in all, it’s taken 16 months for the PSC to work through the case.
In April, NorthWestern agreed on a settlement with other parties that had intervened in the rate case – including the Montana Consumer Counsel, a state office tasked with representing ratepayers. The parties agreed on a gas rate increase and on a partial electric rate increase, but they left two major questions for the PSC to resolve. The biggest was how much NorthWestern should be able to charge customers to recover the costs of the Yellowstone County Generating Station, a natural gas-fired power plant in Laurel.
NorthWestern asked that about $289 million in costs for YCGS be added to its rate base. PSC staff recommended that commissioners follow the MCC’s proposal, which called for reducing that amount by not allowing the utility to claim construction cost overruns beyond its original estimate.
NorthWestern argued building YCGS was necessary, to provide a more stable and reliable source of power generation. But in a memo to commissioners, staff said the company hadn’t done enough to evaluate other possible “cost-effective resources.” They said NorthWestern hadn’t provided enough evidence to show YCGS was the best option for ratepayers.
“Staff concludes that there were significant deficiencies in the planning and procurement processes, that raised serious doubts about whether NorthWestern minimized total costs and risks for customers over the long term,” said Haylee Gobert, a rate analyst for the PSC.
The PSC generally backed the staff’s recommendation, but they allowed NorthWestern to claim an additional roughly $19 million over the MCC’s proposal, to account for costs the company said it incurred when it had to shut down construction of YCGS for two months in 2023. A judge temporarily blocked the plant’s air quality permit after an environmental lawsuit claimed the state had not done enough analysis when approving it.
Commissioners argued the costs of stopping construction, securing the site and then resuming work should not be considered NorthWestern’s fault.
“Trying to get a project of this size, if you can imagine – getting contractors lined back up again and started back up again, fired back up again – it is no small matter,” said Commissioner Jennifer Fielder, the PSC’s vice president.
Four of the five commissioners supported adopting that adjusted recommendation, with Commissioner Annie Bukacek abstaining. Bukacek, who argued the decision to disallow so much of NorthWestern’s cost seemed “punitive,” proposed a motion to let the company claim another $16 million for the cost of switching contractors after they believed the original contractor wouldn’t be able to keep the project on budget or on schedule.
“It's fair to say the ratepayers shouldn't be on the hook for the full amount, but to disallow roughly 20% of the cost of this asset so valuable to Montana, I consider unconscionable,” Bukacek said.
Bukacek and Fielder supported that motion, but Commissioners Jeff Welborn, Brad Molnar and Randy Pinocci voted against it.
In the PSC’s statement after their decision, Welborn, the commission’s new president, said their actions on YCGS recognized both the need for reliable power and the interests of ratepayers.
“The Commission’s responsibility is to strike the right balance—ensuring utilities remain capable of delivering safe and reliable service while protecting customers from paying more than what is just and reasonable,” he said. “This decision, and the $43 million in savings for customers, demonstrates the value of a thorough public process and the dedication of our staff.”
The PSC did adopt NorthWestern’s proposal on the other outstanding question: determining its revenue under the Power Costs and Credits Adjustment Mechanism, or PCCAM. That measurement is designed to capture volatile costs like fuel for power generation and the need to buy power on the open market in times of high demand. It has been reduced since the last rate review, offsetting some of the increase related to costs like YCGS.
PSC staff recommended the commission adopt NorthWestern’s proposed number for now, but said there are bigger questions about the structure of the PCCAM that need to be addressed in the future.
While this rate review is coming to an end, the PSC is likely going to have a lot more to say about NorthWestern Energy in the coming months. The commission will need to weigh in on NorthWestern’s planned merger with Black Hills Corp., but so far, that issue hasn’t been officially scheduled to be heard in front of the PSC.
