After at least 20 commenters urged the Public Service Commission to deny an electricity and natural gas rate increase for Montana consumers, commissioners Wednesday approved a new NorthWestern Energy rate structure that will go into effect next month.
Residential customers will see a 28% increase in bills as compared to August 2022, or an 8% increase since the all-Republican commission approved an interim rate increase for Montana’s largest monopoly utility last fall.
The new rate structure was unanimously approved by the five-member elected body tasked with balancing the interests of captive ratepayers with the financial health of regulated utilities.
The process that preceded the vote and the proposed order itself drew scrutiny from members of the public who testified in person and online, urging the PSC to go back to the drawing board and reject a settlement NorthWestern Energy reached in April with the Montana Consumer Counsel and representatives from several of its largest customers. Words like “devastating,” “skyrocketing,” “patently unfair,” “opaque” and “rigged” were used. The rate changes are expected to increase NorthWestern’s electricity-related revenue by $82 million and its natural gas revenue by $18 million.
Commissioners, in their remarks, countered that the PSC staff review of the rate case was thorough, that several controversial pieces of NorthWestern’s original proposal had been stripped from the order they voted to adopt, and that portions of the rate increase, such as ballooning payments for property taxes, fall explicitly outside the commission’s regulatory oversight.
During public comment, Beki Brandborg, a self-described “landlord of small homes in small towns” said the proposed rate increase would be devastating for many of her tenants, particularly older Montanans living on fixed incomes. She said a 74-year-old retired construction worker who rents one of her properties told her he’d have to set his thermostat at 50 degrees for the bulk of the winter if the increase was approved.
“I’m asking that you please reconsider this proposal — that you deny this proposal and protect Montana consumers like these people,” Brandborg said.
Another commenter, Rob Freistadt, appealed to commissioners’ business experience.
“It’s no secret that if any of us were to raise our rates by 28%, our customers would be going elsewhere. [Northwestern Energy customers] don’t have that luxury. We are dependent upon you to withhold requests that are frequent — constant — from NorthWestern for more money,” he said.
He also said the utility’s insistence on building a controversial new natural gas plant in Laurel has demonstrated how “out of synch” the utility is with other companies in the energy sector.
“Their history is awful, and this body’s control over it has been disappointing. I hope it shows in the next election,” Freistadt said.
In her remarks, Montana Environmental Information Center co-director Anne Hedges said that the order “reads as if Northwestern were allowed to write its own rate increase” and bristled at the fact that the deal was struck with just four of the 13 parties that intervened in the matter. Organizations that were not a party to the settlement include MEIC, climate advocacy group 350 Montana, NW Energy Coalition and Renewable Northwest.
Hedges said NorthWestern and its industrial customers had conspired to “pile the largest share of the rate increase on to hundreds of thousands of families and residential customers across the state [that are] already reeling from increased property tax rates [and] skyrocketing housing and food costs.”
“NorthWestern is a mismanaged utility looking in the rearview mirror when it comes to the energy system,” Hedges continued. “It has no plan to control costs, and this rate case allows it to continue bilking families to enrich its shareholders.”
A spokesperson from NorthWestern Energy did not immediately respond to a request for comment Wednesday afternoon.
Commissioners leaned heavily on the staff who’ve been reviewing the rate case over the past 14 months when discussing the 104-page order and explaining their approval.
During a portion of the hearing dedicated to PSC staff analysis of the proposal, PSC Chief Legal Counsel Lucas Hamilton noted that it had been several years since NorthWestern’s last rate restructuring. The company last proposed increases for electricity in 2018 and for natural gas in 2016. Since that time, NorthWestern has said it has invested $835 million into its electricity infrastructure and $257 million in its natural gas system, Hamilton said.
Hamilton said the 40% of the rate increase proposed by NorthWestern can be attributed to “flow-through” costs, including property taxes and market power purchases — e.g., the electricity it buys from other suppliers to supplement the electricity it generates with its own power plants. He added that much of the increase being discussed has already been incorporated into customer bills given the commission’s approval of an interim rate increase in September 2022.
“Compared to rates that include the interim [increase] and tax tracker adjustments, the bill for an average residential customer using 750-kilowatt hours per month will increase about $8 or 7.6%,” Hamilton said.
During commissioners’ discussion of the order before them, PSC President James Brown said he took “umbrage” at the suggestion that the rate case was anything but thoroughly reviewed and vetted by the accountants and attorneys working for the PSC. Gary Duncan, a former PSC program director who came out of retirement to work as a rate analyst on the case, bolstered that assertion.
“From a staff perspective, all of the issues in this — and there are far more issues than just the revenue requirements — have gotten a very thorough vetting. I believe that staff is comfortable in saying ultimately the settlement is a fair outcome,” Duncan said.
Brown argued that while denying all proposed rate increases would be the “politically expedient” thing to do, it would not satisfy the commission’s legal obligations. He said his analysis of the record, including the testimony offered this spring and the commission staff’s review of the proposal, informed his decision.
“The proposed rates and rate design meet the legal standard we apply of being just and reasonable,” Brown said.
He added that none of the parties opposed to the settlement presented serious critiques of the electricity or natural gas base revenue requirement, or the costs the utility must recover to pay its operational and maintenance expenses as well as investments in physical infrastructure.
Several commissioners said they were sympathetic to the concerns of the residential ratepayers but suggested that “cost-causer” economic and ratemaking principles demand that they shoulder the largest rate increases based on the utility’s costs to provide service to them.
During a six-day hearing related to the rate case in April, attorneys representing some of NorthWestern’s largest commercial customers argued that while their rate increase under the proposal may be modest compared to those of smaller businesses and residential customers, they subsidize NorthWestern’s customers with lower electricity bills and will continue to do so under the new rates.
Brown also highlighted features of the order that take into account the concerns of stakeholders who protested specific provisions of earlier proposals. Those include the exclusion of a “reliability rider” NorthWestern had initially proposed to recover costs for new power plants outside of the traditional rate case. As a result, “not a dime” of NorthWestern’s expenditures on the gas plant it’s building in Laurel has been incorporated into the rate case, according to Duncan.
Though comprising a smaller piece of the hearing, NorthWestern’s proposed natural gas rate increase was also incorporated into the order. Commission Vice President Jennifer Fielder said she was pleased that any increase in natural gas rates would effectively be offset by a steep decline in the cost of natural gas as compared to a year ago when that commodity was particularly expensive.
Fielder successfully introduced an amendment to the order directing NorthWestern to “present a full economic analysis” of the expected benefits of its switch to advanced metering technology during its next rate case. Fielder argued that NorthWestern has prematurely retired “thousands of perfectly good meters” without adequately demonstrating the need for that switch. NorthWestern has said that the switch allows its customers to better manage their energy use and the company itself to respond more quickly to changing energy needs.
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