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Montana PSC: Customers Won’t Have to Shell Out $3.2 Million in Colstrip Outage Costs

August 19, 2016 By Cheryl Kaften

The Montana Public Service Commission (PSC) voted 3-2 on August 16 to uphold a multi-million dollar rate reduction approved March 29 (Docket No. D2013.5.33) – rejecting NorthWestern Energy’s request for reconsideration on the commission’s decision to disallow costs related to a July 2013 outage of  the coal-fired Colstrip Unit 4 to be passed on to its 359,000 Big Sky Country ratepayers.

At issue is $8.2 million in electricity market purchases made by NorthWestern to serve its Montana customers following the outage, which was the result of a core malfunction. NorthWestern purchased the electricity to replace power that would otherwise have been generated at the Colstrip facility.

“I’m not sure what part of ‘no’ NorthWestern doesn’t understand,” said Commissioner Roger Koopman (R-Bozeman). “Certainly, they had a right to bring this before us again. But as strongly as some of us felt that the CU4 outage was avoidable, and that the utility should have exercised greater prudence, the company needed to bring to us some very compelling new arguments. Clearly, they did not. And so, I for one was not about to undermine a very important previous decision that protected consumers from an unjustified rate increase.”

NorthWestern Energy is authorized by law, pending PSC approval, to use a regulatory mechanism known as an “electricity tracker” to recover through rates prudently incurred costs associated with serving their customers. On March 29, the commission found that the market purchases in question did not meet the requirements under state law for NorthWestern to pass the costs on to ratepayers.

“After providing NorthWestern Energy numerous opportunities to convince this commission why we should allow them to charge ratepayers for this outage, they have failed to do so,” said Commission Chairman Brad Johnson (R-East Helena). “After reviewing NorthWestern’s additional arguments, I saw no convincing evidence for us to overturn the significant rate decrease that we approved in March.” Intervening parties to the proceeding, the Montana Consumer Counsel and the Montana Environmental Information Center/ Sierra Club, argued that NorthWestern should have explored outage insurance to protect ratepayers in such an event; and also should have investigated the possibility of requiring that the manufacturer, Siemens, to pay for the electricity market purchases.

The core malfunctioned immediately following a routine maintenance on the unit. The incremental cost of the replacement power market purchases had been included into rates on an interim basis, and so the disallowance of the cost recovery resulted in a refund to NorthWestern’s customers.

During the March 29 work session, the commission also raised concerns with NorthWestern’s disclosure of information in the proceeding. NorthWestern proposed to recover these costs from customers within its application filed May 29, 2014. The application acknowledged, but did not quantify, the incremental replacement power costs attributable to the outage. NorthWestern also failed in their original application to provide a Root Cause Analysis explaining the determined cause of the core malfunction.

One of the two dissenters to the vote, Commission Bob Lake (R-Hamilton), stated: “I fully support legitimate reasons to reduce electricity rates for consumers, but I do not believe the commission had the legal authority to do what we did in this situation.”

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