February 2022 edition
What is the PSC and why do we need it?
(Total estimated read time ~6 min. 40 sec.)
Companies, corporations, and elected officials have moved the pieces determining Montana’s energy landscape for over a century. Today, NorthWestern Energy (NWE) supplies power to two-thirds of Montana’s energy consumers. NWE could transform our state into an affordable and renewable energy powerhouse, but chooses instead to depend on expensive and dirty fossil fuels. Why is NWE planning to spend over $1 billion building a fleet of gas-fired power plants over the next two decades? Why hasn’t the Public Service Commission, the one publicly elected agencytasked with regulating NWE, defended us from rising energy prices and a climate catastrophe? We’ll inspect the past and present of these two entities to uncover the answers and actualize an equitable and sustainable energy future.
The Public Service Commission (PSC) is one of Montana’s smallest state agencies with authority to make some of our state’s biggest climate action decisions. Many of us don’t even know what the PSC is, let alone the scale and scope of the decisions the PSC makes. If you care about climate action, dread paying your monthly utility bill (even after splitting it between roommates), or want the freedom and financial support to use solar panels to generate your own energy, then you should #GiveAShit about the PSC. Before we dive into the what and how of the PSC, however, it feels important to explain why they even exist. And for that, we’ll need to brush up on our high school economics reeeeeeal quick! Bear with us here:
Capitalism and Competition, or lack thereof (Est. read time: ~1 min.)
Capitalism deeply emphasizes the “free” part of free market economics — where prices for goods and services are determined by unrestricted competition between businesses and transactions are “free” from government intervention. Theoretically, this results in the most efficient distribution of goods and services. This romanticized narrative rarely centers the several CRUCIAL requirements for unrestricted competition: there must be no barrier to entry or exit for folks wanting to sell a product, the product offered must be similar from seller to seller, there have to be many different folks selling, and all the folks selling and buying must be well informed about the value of the product.
Are you seeing any red flags yet? 🚩 We know that structural oppression puts up all kinds of barriers and limits on who has the ability, wealth, and knowledge to participate in so many aspects of our society. And that’s just us humans. Mother Natch has her own set of physical limitations we like to forget about too.
Competition matters because when companies don’t have to compete, they become monopolies. As those of us who have played the grueling family board game know all too well, monopolies slowly edge out all other competitors in a market until they have complete control of a captive customer base. In the absence of competition, they can charge exorbitant prices while offering an inferior service or product.
Back to the PSC (Est. read time ~2 min.)
Now that we’ve brushed up on the basics, let’s get back to how this all relates to the PSC. Over a century ago, railroads in Montana were heavily monopolized. Railroads present a classic case of high barriers to entry, limiting competition as a result. It costs a shit ton to build a railroad, and there are often limited paths through the landscape – especially in a mountainous state like ours.
Generating and supplying electricity faces many of the same barriers to competition. It costs big bucks to build a coal-fired power plant or a hydroelectric dam. Installing and maintaining all the electricity distribution lines across the state is also a huge undertaking. Even if it was financially feasible for different electricity generation companies to compete, it makes sense to have one entity manage its distribution. Can you imagine what it would look like to have multiple power line companies installing power lines along the same routes? It would be an inefficient mess!
The legislature recognized the impact these barriers to competition had on consumers’ energy prices, and just seven years after forming the Railroad Commission, they put those very same railroad commissioners in charge of regulating utilities. Following the example of states across the nation, the Public Service Commission was born.
The PSC has evolved over time and is now composed of five partisan commissioners elected from different districts across the state and aided by a staff of expert advisors. The PSC’s jurisdiction expanded to include privately-owned gas, telephone, water, garbage, and sewer utilities. The PSC also regulates rail and pipeline safety in the state. The PSC’s goal remains the same as it did when it first formed — to act as a mediator between utilities and us, the rate payers. The PSC is supposed to ensure we don’t get charged up the wazoo by private utility monopolies while allowing those utilities to make enough money to incentivize stable and reliable service.
How the PSC Impacts Our Lives (Est. read time ~2 min.)
If you are seeking some tangible examples, look no further; here are just a few cases where the PSC can determine both our cost of living and our climate future.
- If you have solar panels on your roof and generate more energy than you use, you can get paid by your utility for putting your excess energy onto the grid. This is called net-metering and lowers the overall cost of having solar panels. The PSC sets the rate that you, the consumer, gets paid for your extra energy and thus determines if money saved and earned through generating your own electricity and net metering is enough to offset the cost of buying and installing solar panels — AKA if it makes financial sense to have solar at all.
- The PSC also determines the price that independent wind and solar farms can sell their energy for — determining if it makes financial sense to build these independent renewable energy projects.
- When utilities, like NWE, want to buy or build another facility or resource, the PSC assesses if that expansion is in the best interest of us, the ratepayers. If the PSC determines it is in our best interest, then the PSC allows the utility to pass the costs off to ratepayers rather than taking on that financial risk as a company. As a result, we could collectively pay millions of dollars to finance coal or gas-fired power plants in an age when we must make a dramatic shift to renewable energy.
- Every few years, utilities have to submit a 20-year plan to the PSC outlining how they will meet the needs of ratepayers. Say, perhaps, that a utility planned to build a fleet of new gas-fired power plants without investing in any renewable energy generation (cough cough, NorthWestern Energy): the PSC decides if the utility’s long-term plan aligns with the interests of stakeholders and the public. In practice, the PSC interpretes this mostly as our financial interest, but it’s within their responsibility to also protect our cultural and environmental interests.
Itching to learn more? Check out this great resource from the Montana Renewable Energy Association.
Unfortunately, the PSC has a spotty history of living up to its founding ideals of consumer protection. Instructions from the state legislature, influence from utility lobbyists, and contention within the PSC itself have undermined the PSC’s mission. We’ll dig into the backstories of these other players in the next issue of Power Play.
Written and compiled by Emma Bode (Bozeman Field Manager), Stuart Rinehart (Bozeman Intern, Fall 2021), and Miles Cevallos (Bozeman Intern, Fall 2021)