Northwestern Energy makes ‘substantial’ rate increase request to PSC

The largest utility company in Montana submitted a request to the state’s Public Service Commission for a “substantial” rate increase for residential electric and natural gas.

If approved by the PSC, the average residential NorthWestern Energy customer would see a rate increase of $22.76 a month, or more than 25%, on their electric bill and $7.57 a month for natural gas, an over 11% increase, with typical customers using 750 kilowatt-hours per month and 65 therms per month respectively. That amounts to nearly $364 a year more.

“This will be one of the most important dockets that the Commission considers through the remainder of this year and then on into next year as we work through the process,” said PSC counsel Lucas Hamilton, who characterized the increase request as “substantial.”

Typical NorthWestern customers in Montana now pay on average just over $88 for electric and over $68 for natural gas, according to a filing with the PSC from the monopoly utility. In 2019, electric rates rose to reflect an average annual increase of about $8.40. In 2017, the PSC approved a natural gas rate increase that added $2 to a customer’s monthly bill.

The PSC was also asked to approve an interim rate increase, which would go into effect in October if approved, and would increase the average monthly electric bill by $14.18 per month and $1.60 per month for the average natural gas bill.

NorthWestern said it has been using information for gas and electric costs from 2015 and 2017, respectively, and that since then, the company has invested more than $1 billion in infrastructure improvements in the state.

Spokesperson for NorthWestern Jo Dee Black said that this investment isn’t factored into the current delivery rate.

“We absolutely recognize that these are challenging times for a lot of our customers and that this review is coming at a time when other costs for households and living are going up,” Black said. “We know that we have customers that this will be very difficult for, and we encourage them to reach out to us if they are struggling to manage their energy bills.”

NorthWestern’s request included a list of 15 other items for the commission to consider for approval, including adjusting the baseline for the Power Cost and Credits Adjustment Mechanism (PCCAM), which Black explained includes variable costs, such as market energy purchases, that flow through to customers.

“We feel that customers will be more efficiently served if that base, (which is) an estimate of what we expect to pay on the energy market to purchase energy for our customers for next year, is more accurate if that base is adjusted annually,” Black said.

Montana is now a net energy importer and needs to go to the energy market during peak energy consumption times, Black said.

Attorney for the Public Service Commission Hamilton said the PCCAM adjustment would also impact what NorthWestern customers pay because of rising energy prices and the rising prices of natural gas.

NorthWestern said it under-collected Montana electric supply costs from July 2021 through June 2022 by approximately $56.9 million, as outlined in the most recent second quarter 2022 financial report release on July 27.

The company reported a net income in Q2 of $29.8 million, a drop from the net income from the same period last year of $37.2 million. It cites, in part, higher operating costs and less favorable liability adjustments with qualifying facilities, which NorthWestern is legally required to work with in Montana.

NorthWestern is also seeking annual adjustments for wildfire mitigation and cyber-security to minimize interruption of service from potential cyber attacks.

The PSC is tasked with determining what a reasonable and prudent return would be on NorthWestern Energy’s investment.

However, Hamilton said that “reasonable and prudent” can be a loose standard.

“There’s no dollar figure you can put on that,” he said. “That boils down to an evaluation of public interest and that will be sort of the guiding star for the Commission.”

Black recommended that Montanans who struggle with this potential rate increase sign up for a free energy audit through NorthWestern to help households assess their energy use. Customers can also sign up for budget billing and apply for financial assistance through Northwestern.

Hamilton said that if approved, the full increase would likely go into effect in late spring or early summer of 2023.

The PSC will be determining whether to approve the interim rates requested by NorthWestern this fall. The PSC’s meeting calendar is available on its website. NorthWestern Energy President and COO Brian Bird will be leading a virtual Montana Rate Review Overview Webinar, and details on when and how to attend will be posted in the future.