HELENA — Montana utility regulators on Tuesday approved a NorthWestern Energy request to boost electricity rates by 6.44 percent starting July 1 so the company can recover $32 million in underestimated supply costs.
Public Service Commission members said it is an interim increase and whether it remains will be contingent on further study. The money can be returned if commissioners find the increase wasn’t justified, commissioners said.
NorthWestern officials say the company’s rates don’t reflect actual market costs over the last 12 months. NorthWestern spokeswoman Claudia Rapkoch said the termination of a power-supply contract with PPL Montana represents the bulk of the $32 million the company is trying to recover in costs.
“Ultimately the customers will pay what is incurred on their behalf,” Rapkoch said.
Also included in that $32 million is electricity purchased on the market after a Colstrip power plant unit went offline for about six months. NorthWestern owns 30 percent of Colstrip Unit 4.
The PSC estimated the Colstrip outage cost $11 million, though Rapkoch said she could not confirm that.
Commissioner Travis Kavulla was the lone dissenter in the 4-1 vote for the interim rate hike. He said the cost of the Colstrip outage should not be included in any rate adjustment.
Kavulla also asked how NorthWestern could have underestimated costs by so much, a question for which the commissioner’s staff did not have a firm answer.
“It is an aberration, and the largest driver of that is this change of contracts,” Rapkoch said.
But the rest of the all-Republican commission was reluctant to deny the request, choosing instead to grant it an interim basis and investigate the details of the Colstrip outage later.
They said it was a question of fairness, and that NorthWestern was only seeking to recover costs it had already spent.
Denying the request to collect the $32 million would represent a significant amount of NorthWestern’s quarterly earnings, and that’s not the message the commission wants to send to the market, Commissioner Roger Koopman said.
Chairman Bill Gallagher said he has no doubt the commission has the courage and backbone “to take the food from the mouths” of NorthWestern shareholders if rebates are merited.
South Dakota-based NorthWestern serves more than 300,000 customers in Montana.