If Senate Bill 331 is about saving Colstrip, why is it focused on a NorthWestern bailout?

In 1913, Montana set up a fairly straightforward bargain: Utilities owned by private investors could be monopolies, but because their customers lacked a choice in provider, they would have their rates reviewed and approved by an independent commission.

Today, the Public Service Commission (PSC) fills that role, but for the first time in a century, Montana’s Legislature is dangerously close to allowing a privately owned monopoly to set the rates that consumers are forced to pay for their electricity.

SB 331 is ostensibly an attempt to throw a lifeline to the Colstrip Generating Station. But nothing in Montana law today prohibits NorthWestern Energy from buying an additional share of Colstrip—and certainly not for $1, as the legislation suggests. In fact, NorthWestern would not even have to ask the PSC’s approval to purchase it. Under existing law, the utility would only have to justify the economics of owning the plant if and when it seeks to recover additional going-forward costs from customers.

That is one thing that SB 331 changes. If the bill becomes law, NorthWestern will be permitted to charge customers up to $40 million without any review of the reasonableness of this spending.

The bill also guarantees NorthWestern a refund of all of its existing investment, more than $300 million, even if Colstrip closes earlier than is currently projected by NorthWestern’s depreciation lifespan. This provision, in section two of the bill, applies even if NorthWestern does not buy an additional share of Colstrip. Recent headlines about the bill thus distract from a central point: SB 331 actually provides as much of an incentive to close Colstrip, as it does to keep it open. Presently, NorthWestern would have reason to worry about getting back its existing investment costs if the plant closed early. With SB 331, that’s not the case.

Ironically, NorthWestern itself is responsible for heightening Colstrip’s chances of closing sooner rather than later. It passed up an opportunity to buy a larger share of Colstrip just five years ago because it would not have been lucrative to the utility in the context of its deal to acquire PPL’s hydroelectric assets. That stranded PPL, now Talen, with a single asset in Montana: Colstrip. This was the moment that Colstrip’s position became untenable. Now NorthWestern wants to be seen as riding to the rescue. For those who follow the Montana energy market closely, their eyes have not stopped rolling since this bill was introduced.

Whatever the intentions of its supporters, what SB 331 actually proposes has little to do with whether Colstrip will close or keep operating. It is, at its core, a power play, outsourcing decisions about utility rates and the plant’s continued operation to the out-of-state investment funds that own NorthWestern. And SB 331 is not the only piece of anti-consumer legislation NorthWestern is pushing. SB 244, which has already passed the Senate, would gut customer protections that make the company bear some of the financial risk of its power-supply decisions.

Montana has again reached the point where a politically connected monopoly is preying on the good nature and credulity of certain officeholders. Those legislators want to protect the community at Colstrip. I don’t doubt their good intentions. But they are going about this the wrong way. If SB 331 becomes law, it would permanently harm Montana’s energy consumers, all because the Montana Legislature made yet another big and stupid decision in a hurry.

Interestingly, Wyoming has decided not to write its utilities a blank check, despite having a larger amount of coal marked for potential retirement. Instead, Act No. 74, which was just signed into law, gives buyers an opportunity to purchase retiring coal-fired generation and sell it to utilities at “avoided cost,” an estimate of what it would otherwise cost to buy an equivalent amount of production from another power plant. The Wyoming law is designed to ensure that power plants are closed only for economic reasons, not political ones. It’s what you’d expect from a legislature that cares deeply about their coal economy, but also has the consumer in mind. Montana’s SB 331, sadly, is what you’d expect if you allowed a single company to write the law in order to maximize its profits.

Image credit: kamilpetran