Opponents say NorthWestern is a company ‘in distress,’ while Pinocci concerned about rate shock

An aerial view of a site near the Yellowstone River in Laurel where NorthWestern Energy is building a methane power plant. (Courtesy of Northern Plains Resource Council)

Everyone in the room can see NorthWestern Energy is in trouble, said lawyer Jenny Harbine: “This is a utility in some distress.”

Thursday on behalf of the Montana Environmental Information Center, Harbine gave an opening statement that outlined the rocky last few years the utility has had in trying to manage its assets and serve customers.

She also asked the Public Service Commission to fully adjudicate questions in NorthWestern Energy’s application for higher rates — and not just approve a settlement privately negotiated with only a handful of parties.

She requested the elected commissioners offer NorthWestern much-needed help in risk mitigation and planning in response to the rate case.

“Now is the time for the commission to take a proactive role to steer Northwestern, arguably the most economically important company in Montana, onto a course that serves the public interest,” Harbine said.

The Public Service Commission regulates utility monopolies in Montana. Thursday was the third day of a PSC hearing on a NorthWestern rate increase request and negotiated settlement.

At the hearing, witnesses took different positions on whether the proposed rates are reasonable and just, and the CEO of the company took the stand — briefly.

Partway through the morning, PSC President James Brown admonished lawyers to return to cordiality after some attorneys — not included in the negotiation — questioned different aspects of the process.

“I think the point needs to be reiterated we have an emotional case before us,” Brown said.

The negotiated settlement NorthWestern signed onto would mean another $268.56 a year for a residential customer in electric and gas costs, according to an exhibit that provided estimates this week.

Under questioning from Harbine, utility expert Karl Rabago said the PSC shouldn’t approve that settlement.

In part, he said the inclusion of the Laurel plant in the agreement left many questions unanswered, and he had hoped for a meaningful opportunity to understand how it was the “least cost, best solution.”

Rabago also recommended the PSC reject the settlement because the 28% increase to electric customers from August 2022 would be too high.

“That’s a pretty hard hit to residential customers, and it seems to me the kind of thing that would be a product of a settlement negation, but not likely consistent with the full adjudication of the issues,” Rabago said.

Under the settlement, residential electric bills would go up $25.36 a month compared to August 2022, according to the hearing exhibit; natural gas would go down $2.98, a 4% drop.

The parties that participated in the negotiation and signed off on it are NorthWestern, Walmart, a Large Customer Group including Exxon, Federal Executive Agencies with Malmstrom Air Force Base, and the Montana Consumer Counsel.

In her opening remarks, Harbine traced the path NorthWestern took to the proposed settlement, and she credited lawyer Chuck Magraw with clearly stating the power utility is in trouble.

In 2020, the company said it needed preapproval of a planned expansion at Colstrip, claiming it was critical for capacity — and then it abandoned the idea before a hearing, Harbine said.

In 2021, NorthWestern wanted preapproval of the Yellowstone gas plant, but it abandoned that proceeding too, she said.

Instead, Harbine said it started building the plant before the PSC could review it, even after intervenors — including the Large Customer Group — said they thought the plant was likely not in the public interest.

Additionally, she said, in the last decade, the PSC has twice disapproved “significant company expenses” associated with major outages, finding that NorthWestern mismanaged or wasn’t prudent in handling the outages.

“The commission leveled significant critiques of the company’s last resource planning process, which as of today haven’t been fully addressed,” Harbine said.

And it’s the second rate case in a row where NorthWestern asks for a revenue requirement and return on equity “well in excess of what they apparently need and have settled for.”

“The company’s actions have put Montana ratepayers at risk,” Harbine said.

A NorthWestern fact sheet counted 379,463 electric customers and 200,272 natural gas customers in Montana in 2020.

On the stand, however, NorthWestern and Montana Consumer Counsel representatives argued they had adequately considered all parties, including residential customers, and the settlement was the outcome of much give-and-take.

Under questioning from lawyer Shannon Heim, Cyndee Fang with NorthWestern said affordability was top of mind as the company negotiated.

“NorthWestern was very thoughtful about what we’ve included in this,” Fang said.

She said the industry as a whole faces stressors, and last time she checked, more than 100 utilities have filed rate cases with their commissions.

Fang said it is challenging to ensure residential customers in particular are cared for, but NorthWestern offers a variety of assistance programs and other support such as energy efficiency programs.

“We have a lot of programs that are available to customers that need that assistance,” Fang said.

Although witnesses for NorthWestern and the Consumer Counsel said the rates in the settlement were fair to all parties, Commissioner Randy Pinocci said he wasn’t so sure.

Pinocci said he had a hard time with the idea a 28% increase won’t give a customer rate shock, especially a retired person on a fixed income.

“This is the largest rate increase I’ve ever seen,” Pinocci said.

Late in the afternoon, NorthWestern CEO Brian Bird took the stand for roughly five minutes. He confirmed his written testimony, and none of the five elected Public Service Commissioners asked him questions.

On behalf of 350 Montana, lawyer Monica Tranel asked him to identify the top five investors in the company, and Bird said he couldn’t necessarily name them, but BlackRock investment company is the largest shareholder.

She also asked him to whom NorthWestern owes a fiduciary duty, and Bird said the company owes it to shareholders, but it also sees itself as having an obligation to serve customers, and he would argue it has a fiduciary duty to them as well.

Tranel said that duty to customers was imposed by Montana statute, which the commission is charged with enforcing, and he agreed the obligation was correct.

In response to additional questioning from his lawyer, Bird testified the settlement balanced reliability, affordability and sustainability. He also said the company made significant compromise.

“I expressed concerns about certain things that we gave away, I would argue, but at the end of the day, we felt that the compromise was fair, not only for our shareholders, but also for our customers,” Bird said.

The hearing will resume 8:30 a.m. Friday.

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