Power Play Issue 3: NWE’s Markup Schemes and Assorted Nefarious Acts
(Total estimated read time ~12 min. 20 sec. – Scroll to the bottom for the TL;DR version)
Last month catch up
In our last issue of Power Play, you heard the tragic story of Montana energy deregulation leading to the bankruptcy of Montana Power, the sale of Montana-financed power plants, and the rise of NorthWestern Energy (NWE). We introduced a lot of terms and players, so if you need a recap, check out this handy glossary that we will keep updated with each new issue.
NWE tries to curry favorable public opinion with announcements and mailers exclaiming how sustainable it is, how ambitious its plans are, and how well it is serving Montanans. However, NWE’s past actions reveal its true intentions. And so begins a non-exhaustive laundry list of NWE’s assorted nefarious acts. In this issue, we will investigate NWE’s dirty relationship with fossil fuels and why it just won’t cut this toxic energy source out of all our lives.
Marking up its assets (Est. read time ~3.5 min.)
Colstrip is an Eastern Montana coal mining town turned power generation mecca that has produced a huge amount of energy for Montana, Oregon, Washington, and the open energy market. Colstrip is in the top 25 most polluting facilities in the US but its days as a coal-fired power plant town are numbered. Washington and Oregon utility companies are phasing out coal power in order to comply with state-level emission reduction goals by 2025 and 2030, respectively. Climate change aside (not that we ever endorse putting climate change aside because it should be a massive driving force for all decisions made this century), energy from Colstrip is already the most expensive power in NWE’s portfolio. In 2017, the Montana Consumer Counsel reported the consumer price of power from Colstrip Unit 4 was more than twice the price of Montana wind power!
Everyone but NWE is jumping ship, so why would our energy monopoly hold onto this costly asset? Well, when NWE bought its share of Colstrip Unit 4 in 2007 from Pennsylvania Power and Light (PP&L) it paid $187 million. NWE then asked the PSC to charge consumers enough to recuperate the costs from buying the plant, but claimed it was worth over $407 million!!! The PSC agreed that NWE could recoup its costs, and Montanans were put on a payment plan that assumes Colstrip will operate until at least 2042. Montanans are still paying this “debt” off with a high-interest rate. As of last year, we owed $272.4 million – which is more than NWE bought it for! NWE needs to keep Colstrip open to milk these remaining millions from Montanans.
This cash cow tactic worked so well with Colstrip, NWE couldn’t resist pulling it again when it bought 11 hydroelectric plants from PP&L. You might remember that massive $900 million price tag for the dams from our last issue. Well, that included an additional $247 million value that was supposed to account for a future where there is a cost for burning fossil fuels. Presumably, the dams were worth more because they do not use carbon to generate electricity.
Once again, the PSC granted NWE permission to pass this cost off to consumers. Rather than adjusting the price to consumers when/if fees for burning fossil fuels occurred, NWE tacked it on from the start, marking up the value of its new asset. The problem is, for the past eight years, there has been no cost for burning fossil fuels! Shout out to 350 Montana, who is suing the state over this “pre-approval law,” which lets NWE pass costs off in advance – before the actual costs are realized. A judge recently ruled in 350 Montana’s favor that pre-approval violates Montana’s constitution. However, this ruling is likely to be appealed by NWE.
Attempted bailouts for bad management (Est. read time ~1 min.)
NWE sees these plants as money-making devices rather than critical infrastructure for Montana. The monopoly has repeatedly cut corners and failed to invest in needed updates, resulting in unreliable operation and increased costs. Colstrip Unit 4 went offline for several months in 2018 for maintenance required to meet air pollution standards and NWE had to purchase power from other companies to make up the difference. It appealed to the PSC that the cost of this purchased power should be passed off to consumers. Thankfully, the PSC declined, saying that “NorthWestern’s supervision of the Colstrip plant was imprudent and that a reasonable utility in NorthWestern’s position would have taken more proactive steps to ensure compliance with emissions standards.” For once, the PSC represented us ratepayers and held NWE accountable for its exploitative business model.
Changing the rules (Est. read time ~2.6 min.)
There are already tons of ways NWE attempts, and succeeds, in screwing over us ratepayers. Currently, regulation from the PSC and state law does delay and limit some of what it can do. Every legislative session, NWE lobbyists attempt to weaken or remove these protections entirely.
NWE hates that the PSC can prevent it from passing costs off to ratepayers. Last legislative session, NWE supported a bill that would have given it a blank check for continued investment in the outdated Colstrip power plant while driving up energy bills for Montana households. It also tried to weaken the Montana Consumer Counsel – the entity that represents ratepayers in PSC proceedings. Fortunately, these efforts failed. But it did get two bills through that rewrite the terms of its private contract between the owners of Colstrip to be more favorable for NWE.
NorthWestern is afraid of potential competition from renewable energy and in the last legislative session it worked to price out rooftop solar, hijack bills that would have expanded the solar industry, and limit existing renewable energy requirements. Tragically, that last effort succeeded. A two punch effort first eliminated our renewable energy standardand then canceled NWE’s $2.5 million debt to low income and tribal energy assistance programs for not complying with the renewable energy standard. Additionally, another bill NWE lobbied for makes the sale of renewable energy to NWE more difficult and prohibits the PSC from considering avoided environmental externalities and carbon emissions when setting rates for renewable energy purchases.
In summary, NWE attempted to, and in many cases succeeded in, changing laws to benefit its profit margins and evade its responsibility to Montanans. The makeup of the state legislature has big impacts on climate justice in Montana and the November 2022 elections will set the stage for another session – so you better f*cking vote!
Wanting to learn more about the tragedy that was the last legislative session? This wrap-up issue of What the Helena and MEIC’s June, 2021 issue of Down To Earth are great resources!
Manipulating the data (Est. read time ~2 min.)
When NWE can’t change the rules, it manipulates the data to make it look like the best financial option for its shareholders is also the best option for Montanans. NWE is required to periodically create a public plan describing how it will provide power in a manner that balances ratepayers’ interest in affordable energy and NWE’s ability to cover its costs while making a modest profit. The 2019 procurement plan identified a more than $1 billion investment in new methane gas plants and keeping Colstrip online for 20 more years as the least cost option while recommending no new wind or solar energy investments.
sored an additional study to rework the math without a thumb on the scales for fossil fuels. They found that while moving towards renewable energy generation would be a large initial investment, it would ultimately save over $30 billion economy-wide compared to keeping coal online!
When NWE can’t manipulate the data, it leaves it out entirely – leaving us wondering what reality it thinks we live in? Recently, NWE released a net zero energy by 2050 commitment. Not only is 2050 much too late, but the commitment does not include clear benchmarks to measure progress. To avoid catastrophic warming, we must retire fossil fuel based energy plants, build no new fossil fuel infrastructure, and set goals of 100% clean electricity by 2030. Under NWE’s plan, we will be building NEW methane gas plants and will keep Colstrip, our dirtiest resource, online until 2043!
TL;DR
NWE has a strong interest in keeping dirty energy online and investing in expensive energy when cheaper and cleaner options are available. It acknowledges climate change when it can make NWE money and downplays climate change when it hurts the corporation’s bottom line. When things don’t go well for NWE, it attempts to have ratepayers bail it out or changes the rules entirely. NWE knows that its continued shenanigans are dependent on ratepayers and the PSC looking the other way, so it fudges the numbers to avoid scrutiny.
So what about the PSC you ask? Isn’t its sole purpose to protect us from greedy monopolies? Yes, yes, that is its job, but it is a bit too busy being embroiled in scandal to pay close attention to NorthWestern Energy. Check out our next issue of Power Play for a PSC Gossip Column – we will dig into the juicy details and envision policy changes that would create a PSC that works for Montana.
Do you have a vision for what it would look and feel like to have transparent, sustainable, and equitable utility services in Montana? We are collecting visions from our members to include in a future issue of Power Play. Share your vision today!
Written and compiled by Emma Bode (Bozeman Field Manager), Stuart Rinehart (Bozeman Intern, Fall 2021), and Miles Cevallos (Bozeman Intern, Fall 2021)