HELENA — If changes aren’t made to Northwestern Energy’s $900 million plan to buy 11 hydroelectric dams from PPL Montana, customer prices could be higher for years while NorthWestern profits will be guaranteed, a state economist said Tuesday.
If the sale goes through, NorthWestern’s 342,000 electricity customers will see an immediate rate increase of about 6.2 percent or an additional $5 on an average customer’s electric bill each month. That amount would be on top of a recent 6.4 percent hike and would make rates nearly the highest of any major electric utility in the region.
Montana Consumer Counsel economist John Wilson told the Public Service Commission that NorthWestern should be open to compromises that put more of the costs and risk on the company and its shareholders.
“There has to be some compromise, some give, so that the only beneficiary here is not the hedge funds and the institutional investors that own 93 percent of NorthWestern’s common stock,” he said.
Wilson said NorthWestern and PPL each are 35 percent owned by hedge funds such as JPMorgan Chase & Co., The Blackstone Group and The Vanguard Group, plus other stockholders.
He said the proposed deal is “very lucrative” for the stockholders of PPL Montana and Northwestern.
Wilson spoke during the second week of a two-week public hearing held by the commission at the state Capitol to determine whether the deal is in the public interest.
Northwestern officials have said the purchase of the dams will assure that customers have stable electricity rates in the future because they’ll be based on the production rather on the whims of a largely unregulated and at times volatile wholesale market.
Wilson said Tuesday while market prices may be volatile, they’re likely, for some time, to remain below the price consumers would have to pay if they cover most of the $900 million dam purchase cost.
“If I have a choice between prices that vary widely, say from $30 to $50 (per megawatt-hour) and a stable price of $55, I’d certainly take the volatile prices,” he said. “I think rational consumers, and sensible businesses, would rather have a lower total cost with some variability in it . than a stable cost at a substantially higher level.”
NorthWestern officials have also said the purchase would create a more diversified portfolio for the company and called the dams more environmentally responsible, lower-risk supply resources.
The largest electric and natural gas utility in the state, NorthWestern announced the deal with PPL Montana last year. The dams had been owned by the Montana Power Co. until PPL bought them during deregulation in the late 1990s and early 2000s.
The proposed purchase is backed by Gov. Steve Bullock and has received unanimous endorsement from the legislative Energy and Telecommunications Interim Committee, which has jurisdiction over the Public Service Commission.
The commission must give its approval for the sale to move forward. A decision is expected in September.