The Montana Public Service Commission is considering a proposal by NorthWestern Energy to acquire an additional 25 percent of the power output of Colstrip Unit 4. The acquisition fills a need for reliable and dispatchable power. This lessens NorthWestern customer’s increasing vulnerability to price spikes and power shortages.
In recent years, customers have had to absorb significant energy costs when NorthWestern had to purchase power from other utilities on the spot market to meet times of high demand. Those price spikes could have been minimized or avoided had NorthWestern Energy owned additional Colstrip generation.
Under the proposal, NorthWestern would acquire 185 megawatts of Colstrip generation capacity from Puget Sound Energy. This acquisition is structured so it will not increase customer bills — typically when NorthWestern builds any new generation facility, including renewables, customers pay more.
Significantly, NorthWestern is not taking on additional liability for future reclamation and remediation costs — Puget Sound Energy has agreed to retain those liabilities. Additionally, a portion of the acquired generation will be sold back to Puget for the first five years of the deal. The proceeds of those sales will be set aside by NorthWestern in a special fund to cover its decommissioning and remediation costs for Colstrip.
NorthWestern has been a leader among utilities by focusing on increasing “green” energy capacity. If the PSC approves this acquisition, the majority of NWE’s generation will still come from “green” sources. Fifty six percent non-carbon energy compared to an average of just 28 percent among utilities nationally.
As Montana’s largest utility, thousands of Montanans depend on NorthWestern to provide reliable electricity. But around our region dozens of power plants are being shut down, leading to an electricity supply constraint that has energy experts worried.
The Northwest Power and Conservation Council, whose primary task is developing a 20-year electric power plan for our region, has forecasted a one in four probability that by 2026 supply will no longer be able to meet demand at times of peak usage. In Montana, peak usage translates to sub-zero winter nights when neither wind nor solar generates and when hydropower generation is the most challenged. This is the most critical time possible and system plans must account for the peak.
In our region, NorthWestern Energy generates the least amount of electricity relative to customer base of any utility. NorthWestern is more reliant on buying outside power than anyone else. In fact, NorthWestern generates only 46 percent of the electricity it needs – the typical utility in our region generates over 85 percent of its own power. The proposed Colstrip acquisition helps to close this gap.
Before the Colstrip deal can proceed, the Montana Public Service Commission (PSC) must provide preapproval. This first step in a lengthy process is designed to ensure that Montana energy consumers are treated fairly and not exposed to undue risk. I for one urge the PSC to give it the green light to proceed. It appears to me to be a good deal for Montana energy consumers. It lowers exposure to price volatility and ensures energy reliability. And it makes plans for the remediation costs we know are coming.
Sen. Tom Richmond represents Senate District 28 in Billings.
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