HELENA — NorthWestern Energy officials said Monday they won’t appeal a nearly $23 million increase in this year’s Montana property taxes that the company had underestimated by several million dollars. Instead, its customers will foot most of the bill.
Public Service Commission members questioned NorthWestern and Department of Revenue officials about the tax increase Monday, expressing frustration about the amount and the utility’s ability to simply pass it on to its customers.
The increase is primarily a result of NorthWestern’s $900 million purchase of 11 hydroelectric dams last year from PPL Montana. The dams boosted the NorthWestern’s assets and drove up its stock price, which factor into how the utility’s taxes are calculated, Revenue Director Mike Kadas said.
“NorthWestern paid considerably more than what we had valued that property at under PPL ownership,” Kadas said.
Under PPL, the department had valued the dams at between $500 million and $600 million, Commissioner Roger Koopman said.
The revenue department originally figured the amount NorthWestern owed in property taxes this year is $137 million, compared with $99 million paid in 20014. The final amount was reduced to $122 million after utility and agency officials met.
NorthWestern had budgeted for a $17 million property-tax increase, attorney John Alke said. That’s about $5 million below the final amount.
The utility could, but decided against, appealing to the Montana Tax Appeal Board. The appeal board doesn’t favor corporate taxpayers, and there was a chance that litigation could leave the company with an even higher tax burden, Alke said.
“The state tax appeal board is not neutral,” he said.
Kadas disagreed with Alke, saying the board is “a very independent body.”
NorthWestern’s customers will pay for between 60 percent and 76 percent of the tax increase. That will amount to about a 4.5 percent increase in the typical electricity customer’s bill and a 4.9 percent average increase for natural gas customers, Alke said.
Commissioners’ questions about whether NorthWestern shareholders should pay more, and about lowering the utility’s other taxes to lessen the overall effect on its customers, were met with the same answer: State lawmakers set those rules, and they can’t be changed by the commission or revenue department.
The ability to pass on costs to its customers does not give NorthWestern much incentive to keep its property tax liability down, Commissioner Travis Kavulla said. Another commissioner, Kirk Bushman, said he was frustrated by having to pass on the tax amount the revenue department comes up with to the customers.
“Once the assessment comes out, you are correct, you don’t get to say, “We don’t think that’s the right number,’ ” Alke said.
The PSC plans to investigate whether NorthWestern erred in its rate increase filing for the taxes to the commission and to consider whether the company should be required to disclose its tax liability to customers.