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Re-regulating NorthWestern?

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We may be more than a day late and a dollar short—a decade past and millions of dollars poorer is more like it—but nevertheless, recent news that the state’s Public Service Commission (PSC) is exploring ways to encourage NorthWestern Energy to return to cost-based electricity rates and scrub Montana’s attempt at deregulation has been roundly welcomed.

Representatives from the PSC, NorthWestern and the Montana Consumer Council met mid-March to begin discussing legislation that would allow utilities to own power-generating plants, which was banned by 1997’s deregulation law. Since deregulation, which was supposed to herald cheap rates and bountiful consumer options, the cost of power in Montana has doubled and NorthWestern has struggled to recover from bankruptcy.

At a City Club meeting March 17 in Missoula, NorthWestern’s Director of Energy Supply John Hines explained why the current setup is unsustainable for both his company and customers: Since utilities can’t generate their own power, they must buy it at market rates and resell it to customers for the same price, which has resulted in skyrocketing consumer costs. Meanwhile, NorthWestern can profit only from its distribution network, which means it must spend mega-millions to purchase power and then recoup only its costs.

Should the state again allow “vertical integration,” PSC Commissioner Bob Raney says state regulation would ensure that “customers get their energy on cost-based prices rather than where we’re at now, which is whatever the market will bear.”

Raney says legislators requested the PSC start working up proposals so they’re ripe for next January’s legislative session. Though the 2005 Legislature considered a vertical integration bill, it died due to problems with the wording. While the idea will require plenty of time and millions of dollars to implement, Raney says we might as well get started.

“We have to turn in a new direction in Montana. We’re being taken to the cleaners by energy companies that we’ve never even heard of,” Raney says. “It will take a generation or more, but we’ve got to begin right now to turn this giant mistake around.”

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