Energy futures

Proposed energy portfolio gets mixed reviews



The dozen or so people who spoke at the Montana Public Service Commission’s (PSC) Hamilton hearing last week minced no words when discussing what a Montana energy supply portfolio should look like: less coal, more wind and more conservation.

Montanans representing a variety of consumer groups—the poor, the retired, the small business owner and the simply interested—spoke with one voice to PSC Commissioner Matt Brainard and NorthWestern Energy’s Bill Pascoe: Don’t foul up Montana’s air and water with more coal-fired generating plants, they said. Take greater advantage of the Montana wind and include conservation as part of the state’s overall energy plan.

The PSC hearing in Hamilton was one stop on the PSC’s statewide road show which ends May 22 in Roundup. The PSC is taking testimony from any Montanan who wants to speak on the energy supply package put together by NorthWestern Energy, formerly Montana Power Company.

When the Legislature deregulated the energy business in 1997, it was assumed the market would open up to competitors bidding for the right to sell electricity to Montana consumers. So far retail competition has not emerged and NorthWestern has become the default supplier of electricity to the approximately 290,000 residential customers it assumed when it bought Montana Power’s transmission lines.

NorthWestern, which will become the residential default supplier of electricity July 1, was directed by the Legislature to develop a diverse and secure energy portfolio to ensure the lights stay on and the irrigation pumps keep pumping after a rate freeze ends July 1.

The company did so and presented it to the PSC for its approval, but not everyone is convinced that NorthWestern negotiated the best contracts for its customers.

The PSC is now reviewing those contracts with advice and suggestions from the folks who will be on the receiving end of NorthWestern’s energy supply.

Residential energy prices are expected to increase by 13 percent this July—or $6.50 a month for a typical household using 750 kilowatts a month—and another 7 percent in July 2003, for a total of 20 percent in one year. NorthWestern’s Pascoe defended the increases, saying that in the past two years energy prices in the Pacific Northwest jumped from 17 percent to 58 percent. The rate freeze enacted in 1997 with deregulation, he told the crowd, kept Montana’s energy prices stable and relatively low for four years. After the 7 percent increase expected in July 2003, NorthWestern anticipates no further rate increases for the foreseeable future.

It wasn’t necessarily the price of electricity that got the crowd’s attention, however. Rather, it was the sources of electricity that had Bitterrooters concerned.

A quick look at the portfolio shows that most of the supply comes from traditional sources of power: coal and hydro. NorthWestern has contracted to buy 1,129 megawatts of electricity from a variety of sources, the majority—450 megawatts—from PPL Montana, the Pennsylvania company that purchased Montana Power’s coal plants and dams in 1999. Part of that portfolio includes 150 megawatts of wind-generated electricity NorthWestern proposes to buy from Montana Wind Harness. The purchase agreement is for 50 megawatts apiece, and though the generation technology is proven, wind, because of its variability, is expected to generate only 63 reliable megawatts.

The Hamilton crowd liked the idea of wind generation, was critical of counting megawatts from Milltown Dam, and was disappointed at the lack of conservation in the portfolio.

Chuck McGraw, a spokesman for the Human Resource Council, spoke for many in the room when he told Brainard, “Our conclusion is that the company is to be applauded in one respect and criticized in another respect.” The lack of conservation in the portfolio, he said, is a mistake. Conservation, he says, is cost-effective. “It lowers the total cost of energy…leads to overall rate stability, and there is, frankly, no legitimate reason it was not included. On the plus side, the company did include wind power. It’s a mixed bag from our perspective.”

John Bushnell, a utility economist for the Montana Consumer Council, focused on the 150 watts generated by Montana First Megawatts from a natural gas facility near Great Falls. Montana First is a NorthWestern affiliate, said Bushnell. Montana law requires greater scrutiny of such arrangements, especially in this case because Montana First provides the “highest resource” by providing energy at peak usage times.

Pascoe defended the portfolio, stressing its diversity and reliability. Though he didn’t directly answer the criticism over the lack of conservation, a question-and-answer handout sheet addressed the issue: “[E]ven under the most aggressive estimates, conservation would represent a relatively small portion of the total portfolio, and the primary need is to ensure a reliable source of electricity beginning July 1…” The company says that “there will be further opportunities to define the role conservation should have in the total mix after July 1, 2002.”

The PSC is expected to make a decision on the portfolio on May 31, in plenty of time to meet the July 1 deadline.

Meanwhile, an initiative effort to buy back Montana Power’s generating plants from their new owner is proceeding as planned. Initiative-145, if approved by the voters in November, would create an elected public power commission to determine whether purchasing hydro dams in Montana is in the public interest. The commission would negotiate with PPL Montana to buy back the dams or, if necessary, use condemnation powers to buy the dams at fair market price. Montana’s small consumers would have priority to purchase electricity.

David Ponder, executive director of the Montana Public Interest Research Group, says that signature gatherers have met their goal by more than half. Backers must collect 20,150 signatures from 34 legislative districts by June 21 to qualify for this fall’s election. So far, more than 10,000 signatures have been gathered from 15 legislative districts. A big push is planned on the day of the primary election, June 4.

Ponder says comments have been largely favorable, with the majority of signers saying they’re as concerned for the state’s economy as they are for their own pocketbooks.


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