HELENA – An Idaho attorney who owns two independent power plants in Montana is criticizing NorthWestern Energy’s request for a $15 million annual rate increase, saying the company has paid more in dividends over the past two years than it reported in net income.
In 2006 and 2007, NorthWestern reported $91 million in net income, but paid out $91.3 million in dividends to owners of company stock, according to the company’s financial statements.
NorthWestern Energy President and CEO Mike Hanson said the 100 percent dividend payout over the past two years is an aberration, skewed by a $19 million income write-down stemming from a 2006 court judgment that the company is appealing.
“When we normalize our income, we’ll be within the (standard) range for dividend payout,” Hanson said.
Owen Orndorff of Boise, Idaho, said that if the company needs more operating cash, it should reduce its dividends instead of raising rates for customers.
NorthWestern said dividends have nothing to do with whether the proposed $15 million rate increase is “just and reasonable” or necessary.
“NorthWestern Energy’s costs of providing electric and natural gas service is not determined by the dividends paid by the corporation to its stockholders,” attorney John Alke of Helena wrote in documents filed with the state Public Service Commission last month.
The $15 million annual increase would be a 2 percent hike in electric and natural gas rates for NorthWestern’s 320,000 Montana customers.
PSC Chairman Greg Jergeson, D-Chinook, said the panel may consider the dividend issue when it rules on the rate increase in early July.
“The concern is if they pay dividends beyond what net earnings can reasonably support, they are reducing their equity, and that can’t go on indefinitely,” Jergeson said.
Alke said the company’s credit ratings are improving and that Orndorff has no proof the dividend payouts have hurt the company’s finances.
Orndorff owns power plants in Billings and Colstrip that sell power to and buy power from NorthWestern Energy.
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