NorthWestern’s investment in Colstrip plant could be costly for customers, witness testifies

NorthWestern Energy paid zero dollars for additional shares of the coal-fired plant at Colstrip — but even no money at all might be overpayment.

That’s according to Ronald Binz, who testified Tuesday in a controversial hearing before the Montana Public Service Commission about NorthWestern Energy’s bid to increase its electricity rates, among other issues.

In January 2026, the monopoly utility, the largest in Montana, will increase its ownership of the electricity generation facility in Colstrip from 15% to 55%, but Binz said the increase comes with significant risk and high potential costs for customers.

Units 3 and 4 at Colstrip began operating in 1984, according to a history of the plant by the Northern Plains Resource Council.

“There’s a sense in which they’re paying too much — even acquiring it at zero cost — because they are buying a plant with substantial liability,” said Binz, an energy policy analyst.

At the hearing, expected to wrap up as early as Wednesday, the Public Service Commission is considering settlement agreements among select parties, including NorthWestern Energy.

Binz testified Tuesday on behalf of a group of organizations that argue the utility purposefully excluded more affordable options when it evaluated how to best serve electricity customers, and the PSC should hold it to account.

Utilities earn profits off of capital investments, and NorthWestern built an estimated $320 million gas-fired plant in Laurel without gaining pre-approval by the PSC. It argued it needed to move quickly to save money.

It also has planned investments in Colstrip, contested in the current rate case.

The group of organizations opposed to the settlements with NorthWestern argue the PSC should scrutinize the costs that will be passed onto customers from the methane-fired plant, the Yellowstone County Generating Station, and the ailing coal-fired plant in Colstrip.

In opening statements on behalf of the group, lawyer Jenny Harbine urged the PSC to “embrace … its leadership role” and open a separate docket focused on developing a plan to avoid or mitigate risks at Colstrip.

Harbine also described NorthWestern Energy as “testing the boundaries of its discretion.”

“Following years of being allowed to expand those boundaries, the company, in this rate case, again seeks reward for its risky investments that have served to drive up electricity rates,” Harbine said.

In fall 2023, the PSC approved a NorthWestern settlement that increased residential electricity rates for average customers by 28% from summer 2022.

Currently, based on data from NorthWestern, residential customers are likely to be paying $127.24 a month come July 1, a 39.4% increase in three years, before any order in the current case is issued.

NorthWestern has said if the PSC approves settlements in the current case, it would receive a 4.2% increase compared to rates from July 2024.

Citing data from the U.S. Energy Information Administration, Commissioner Annie Bukacek said Montana has the second lowest electricity rates for residential among the states categorized as in the Mountain region, second behind only Idaho.

However, Harbine said one important factor in the current case is the way permanent increases would continue to accrue. A customer’s bill includes a base cost, generally permanent, and it also includes ongoing costs that can go up or down.

In this case, Harbine said NorthWestern is proposing a 20% increase in its base rate, which would come on top of a 20% increase in its base from the most recent case.

“The impact to ratepayers, again, is durable, and it’s substantial,” Harbine said.

Binz, former chairman of the Colorado Public Utilities Commission, agreed Montana has had relatively low rates compared to the rest of the country, albeit not as low as some states in the Pacific Northwest with a lot of hydro power.

However, he said the low costs are due to many years of stable coal prices. He said that trend is changing.

Binz also said even though the purchase at Colstrip cost NorthWestern no money, it could state a market value for the plant that’s more than zero, and if that amount ends up in the base rate, the cost to customers won’t be zero.

“Customers are going to pay a lot for that even if the company did not,” Binz said as a potential outcome.

He also said ensuring the plant is compliant with federal regulations on mercury emissions will “require significant investment,” although PSC President Brad Molnar said the Trump administration recently delayed the implementation of the Mercury and Air Toxics Standards.

Burning coal releases pollutants, including mercury.

Nonetheless, Binz said it is difficult to predict when and if the rule would be completely abandoned, and he believes it is “highly unlikely” future administrations of any political party are going to ignore damage from mercury, other toxins and emissions.

In the past, Binz said, renewable costs were higher than fossil fuel equivalents. But he said that’s flipped with wind, solar and storage.

Binz, who also previously led the Colorado Office of Consumer Counsel, said utilities have a duty to give up the biases they have held around costs, or the idea fossil fuel generation is automatically more affordable.

He offered a prediction about the facility at Colstrip.

“Colstrip is going to be very expensive to keep going unless you make assumptions that there will be no penalty or sanction for its current level of mercury and air toxic emissions,” Binz said.

In his written testimony, Binz noted of the 314 coal-fired units covered by the federal standards, only two would require new pollution controls, both at Colstrip, based on an estimate from the U.S. Environmental Protection Agency.

In the January 2025 statement, he said NorthWestern confirmed “it is their understanding that Colstrip is the only operating coal plant that will be required to make a substantial investment to comply with the new MATS rule.”

When NorthWestern CEO Brian Bird announced in January 2023 the additional acquisition at Colstrip, he admitted he was probably the only executive adding coal to his portfolio.

“More resources that can generate power on-demand, 24/7, located in Montana and dedicated to serve Montanans, are needed to meet our responsibility to provide our customers with reliable energy service, keep them safe in all weather conditions and avoid an energy crisis,” Bird said at the time.

NorthWestern’s acquisition includes shares from Avista, which in 2023 said coal generation might become “obsolete” through regulation or legislation.

Binz, though, said NorthWestern Energy is failing the public with its bias against wind and solar.

In her opening statement, Harbine said witness testimony shows customers are facing escalating costs at the Colstrip facility, which is 40 years old.

She argued the PSC should send a message to NorthWestern that it won’t rubber stamp those costs, “now or in the future, for any resource, including for Colstrip, that could unnecessarily harm customers.”

On the witness stand, Michael Barnes, superintendent of power generation at Colstrip, said it would take 33 to 44 months to install pollution controls that would ensure the facility is compliant with Mercury and Air Toxics Standards.

Under questioning by Harbine, Barnes agreed the costs for an overhaul of Colstrip Unit 3 was about $55.5 million in 2025, more than double the overhaul for 2021.

Barnes said a couple of factors contribute to the increase, including that a condenser in the facility was “re-tubed.” Those plants have tubes that need to be replaced if they start leaking.

“We’re starting to get to a time where we’re getting too many outages, and they’re going to be exponential even from here, because look, that was all original equipment,” Barnes said.

He also said materials, labor and other costs are more expensive than they were in 2021. He said NorthWestern has paid its 15% share of those costs, and its portion would increase to 55% if the acquisition goes as planned.

He acknowledged Unit 4 at Colstrip is expected to need an $81 million overhaul in 2027, necessitated in part by the age of equipment and effects of repeated heating and cooling.

However, a lawyer representing NorthWestern asked Barnes if overhaul of a coal generation plant is “a normal occurrence,” and he agreed, although he said the intervals of the work may vary.

Barnes also said it’s more cost effective to maintain an old plant than build a new one, and he said he believes the Colstrip facility is critical to NorthWestern’s entire system.

“Nobody’s building a coal plant these days, but if I was to build one, I know it would be very much more expensive than it is to maintain this one,” Barnes said.