Public Service Commission: NorthWestern tried to evade scrutiny

Public Service Commission leadership is calling on the Federal Energy Regulatory Commission to investigate NorthWestern Energy for attempting to evade the law with its plan to shift new shares at the coal-fired Colstrip plant to a shell company.

“NorthWestern and NW Colstrip have employed a strategy to violate Montana law and avoid FERC scrutiny of transactions,” the Public Service Commission said.

In July 2024, NorthWestern Energy announced it would acquire shares from Puget Sound Energy at the Colstrip electricity generation plant, and existing customers would benefit starting in January 2026.

But the utility holding company later formed a subsidiary, called NorthWestern Colstrip 370 PuLLC, and the utility is directing all the new shares to the subsidiary, an entity it said isn’t subject to Public Service Commission authority.

NorthWestern said it transferred the Puget purchase agreement to the subsidiary, so the subsidiary will acquire the new shares directly on Jan. 1, 2026, and the utility itself will not acquire or hold them.

In October, the subsidiary submitted a proposal to the Federal Energy Regulatory Commission to sell electricity generated from the new shares on the wholesale market, and it told the PSC it plans to do so until its existing customers need the capacity.

Wednesday, the Public Service Commission filed a motion to intervene in the federal docket, raising numerous objections to the deal.

The filing, signed by PSC President Jeff Welborn and Vice President Jennifer Fielder, said NorthWestern Energy is a public utility, and the transfer of assets without PSC authorization likely violates Montana law.

It also said Puget Sound’s transfer of assets to NorthWestern (and NorthWestern directing them to its NW Colstrip subsidiary) without approval from the Federal Energy Regulatory Commission violates federal law.

Additionally, the Public Service Commission said the subsidiary is attempting to sell energy and capacity it “neither legally owns nor controls” without the federal approval required.

In an earlier letter, however, NorthWestern told the Public Service Commission its plan protects existing customers from costs and liabilities associated with the new shares, and it allows the utility to offset operations and maintenance through wholesale sales — an assertion a conservation watchdog said demands examination.

NorthWestern also previously argued that questions regarding transfer of assets are squarely outside the scope of the proposal it submitted to the Federal Energy Regulatory Commission — about a rate for wholesale sales.

In its filing with FERC, the Public Service Commission said a failed bill from the 2025 Montana Legislature is relevant in the case.

It said the proposed legislation attempted to exclude legally separate entities established by public utilities from the definition of a “public utility,” exactly the scenario NorthWestern asserts exists now.

The bill failed, but NorthWestern continued to try to shield its transfer from scrutiny and attempt an end run around Montana law, according to the Public Service Commission.

In failing to request approval for a transfer and instead seeking to sell on the wholesale market, the utility is “hoping to avoid state- and federal-level scrutiny regarding ownership and the associated state law violation,” the PSC said.

NorthWestern argues the Federal Energy Regulatory Commission’s jurisdiction isn’t triggered yet on any transfer, but the PSC said the deal to handle the Puget asset “was engineered to avoid Montana regulation, stop-gapped with a last-minute attempt at legislative change.”

The Public Service Commission also said NorthWestern’s move to direct Colstrip shares to the new subsidiary “before” they were officially acquired doesn’t mean the deal is outside the scope of federal authority — the subsidiary’s “most questionable argument.”

“It appears that NorthWestern’s strategy all along has been to avoid FERC and state scrutiny of this transaction,” according to the filing.

In its motion, the Public Service Commission asked the federal regulatory commission to reject NorthWestern’s filings and launch an investigation; “Montana will do the same.”

In an email, Public Service Commission spokesperson Alana Lake said regulatory staff identified the critical issue at the federal commission, and “their swift action” allowed the PSC to make a timely intervention.

“We are hopeful that FERC will acknowledge and address our concerns,” Lake said.