Montana’s largest electric utility will file its first full rate case this year in a decade – but, as a starting point, NorthWestern Energy’s residential rates already are close to the highest in the region, for private utilities.
As of Jan. 1, NorthWestern’s 360,000 customers in Montana are paying about 11.3 cents per kilowatt hour (kWh) for their electricity – the highest per-kWh rate of any large, investor-owned electric utility in Montana, Idaho, Washington, Wyoming, Utah or Oregon.
For a household consuming 800 kWh, that means a monthly electric bill of $94.74. Natural gas is billed separately.
An MTN News survey of eight other utilities in the region showed that the only higher monthly electric bill for a household at that consumption level is for Portland General Electric, at $99.43.
PGE charges a slightly lower per-kWh rate of 11.05 cents, but its minimum monthly charge for homeowners is $11, nearly three times what NorthWestern charges at $4.10.
John Hines, vice president of supply for NorthWestern, told MTN News this week that the aftershocks of utility deregulation are still a primary reason for the company’s relatively high electric rates.
NorthWestern’s predecessor, Montana Power Co., sold off its power-generating plants in the wake of deregulation in the late 1990s. Once deregulation was repealed in 2007, NorthWestern started re-acquiring power sources, culminating in the 2014 purchase of the hydro-electric dams that MPC sold in 1999.
Hines says other utilities in the region held onto their plants, and that their ratepayers have benefited from that long-term ownership.
“The cost of that generation goes down over time, because of depreciation,” he says. “So, because Montana is just rebuilding its (power-generation) portfolio, those resources are a little bit higher cost, relative to other utilities that have had them in ownership for an extended time period.”
State regulators also noted that in the past 10 years, since deregulation was repealed, NorthWestern’s electric rates have increased at a lesser pace than other utilities in the region.
“So, from that inflated starting point that was the result of (deregulation), to date, really, the record of rates has been pretty good,” says Montana Public Service Commission Chair Brad Johnson, R-East Helena. The PSC regulates NorthWestern’s electric rates.
MTN News surveyed residential electric prices for nine utilities in six states, including NorthWestern, and the Flathead Electric Co-op, which is a nonprofit, but is the second largest electric provider in the state.
Highlights of the survey include:
Public Service Commissioner Travis Kavulla, R-Great Falls, says NorthWestern has made a series of “very bad bets” on buying power-generation sources in the past decade. If NorthWestern hadn’t invested in a chunk of coal-fired power at Colstrip in 2009 or purchased the dams, and instead relied on purchases from the market, its customers would have saved several hundred million dollars, he says.
But Hines says that argument is essentially “deregulation, Part 2,” and state policymakers rejected that approach 10 years ago, deciding consumers would be better off under the traditional utility model: The company owns power plants and charges ratepayers for the cost, but ratepayers get a steady, reliable source of power whose cost declines over time.
“It does take time for owned generation to pay off for customers,” he says. “And it does take policymakers with courage to make that commitment, knowing up-front costs are a little bit more.”
NorthWestern does still get about one-third of its power for customers from the market, whose prices are at historically low levels right now.
NorthWestern and state regulators also note that the company pays some of the highest property tax rates in the region, and that those costs are passed on to ratepayers, making up 11 percent of electric bills.
But even if NorthWestern’s tax costs were cut in half, its rates would still be the second-highest in the region.
NorthWestern plans to file a rate case with the PSC this fall, proposing new rates to cover updated costs. Both the company and PSC officials say it’s premature to say how the rate case may affect electric rates, and that NorthWestern is still calculating its costs. The case won’t be decided until well into 2019.
Utility Monthly bill @ 800 kWh per kWh rate
Portland General Electric $99.43 11.05 cents
NorthWestern 94.74 11.33 cents
Pacific Power (Oregon) 89.74 10.03 cents
Rocky Mtn Power (Utah) 85.60 9.95 cents
Rocky Mtn Power (Wyoming) 83.22 7.9 cents
Puget Sound Energy (western WA) 79.69 9.03 cents
Flathead Electric Co-op 78.13 6.87 cents
Avista (eastern WA) 72.42 7.99 cents
Montana-Dakota Utilities (MT) 72.38 8.41 cents
Idaho Power 70.84 8.23 cents