Small power producer Lee Tavenner had heard plenty of talk about promoting “alternative” or “renewable” in Montana – but this week, he’s hoping the talk might translate into action.
“I see a state that has gone crazy about wind power, but will not do anything with the best method to promote it,” he said. “This is a tool that can actually implement, rather than just talk, about renewable energy.”
Tavenner, who installs solar-power systems and owns a small hydroelectric project near Philipsburg, is talking about an obscure set of federal and state laws that have helped launch independent, alternative-power plants across America since the early 1980s.
This week, whether these laws are being enforced properly in Montana comes to a head before the Montana Public Service Commission.
In a complex case that’s had scant publicity, the PSC will decide issues that could provide a boost to small wind, hydro or other renewable-power projects.
The PSC will decide whether the law entitles these small power projects to standard, long-term contracts to sell electricity to NorthWestern Energy at a price that, in their eyes, will encourage their development across rural Montana.
“They’re doing this in other parts of the country,” said Dave Healow of Billings, who has developed a few small wind-power projects in Montana. “Why can’t we do it here?”
The resistance is coming from NorthWestern Energy, which would have to buy power from these projects and then pass on the electricity and the cost to its 300,000-plus customers in Montana.
It argues that these smaller projects should not get a guaranteed, long-term contract just because they exist as a “qualifying” alternative-energy project.
John Hines, director of energy supply for NorthWestern, said they should bid for contracts, just like every other electricity supplier does now.
He also said prices sought by the small-project owners are likely to be “above market,” so NorthWestern’s customers in Montana will end up paying more than they should.
“NorthWestern wants to have a process where we can buy resources that are the best fit for our customers,” he said. “A fair way to test that is through the competitive process. The generators with the lowest cost rise to the top.”
Alternative power-project developers’ first reply to NorthWestern is simple: State and federal law essentially require that they get a contract, if they have a “qualifying” project. It doesn’t matter if NorthWestern doesn’t like it.
The law’s whole purpose is to level the playing field for small, alternative power projects, which can’t afford to bid against larger players and who face inherent resistance from utilities, who don’t like independent power producers, they say.
“(Utilities) have what might be called a bias against purchasing power from small producers,” Healow said. “They hide it behind the pretense of protecting the consumer. But, basically, it’s a prejudice.”
Montana’s Public Service Commission must decide how to enforce the law, in the face of charges that NorthWestern has refused to comply and the PSC has failed to make the company comply.
The law says that if small power projects cannot agree on a contract with NorthWestern or any other public utility in Montana, the PSC will decide the rates and terms of the contract.
Small power producers and their allies have been arguing for nearly three years that NorthWestern won’t even provide the proper data to set a price.
They also want the PSC to require a standard contract that is long term, such as 20 years, and to increase the size of small projects that qualify for the contract, from the current three megawatts to 10 megawatts.
NorthWestern, however, says the rate-making process sought by the projects could lead to the company – and ratepayers – paying prices that are higher than what can be found on the open market.
“What’s our role?” Hines asked. “Is it to be (rural) economic development, or is it to find the best product for our customers? It shouldn’t be our ratepayers’ job to ensure that a business plan works out for certain types of power producers.”
Project developers acknowledge that higher-than-market prices could occur. But even if it does, the small projects offer other advantages, they say.
The projects offer pollution-free power and potential competition to established generators, such as PPL Montana, they say.
And, small wind, hydro and other alternative-power projects do offer a boost to rural, local economies in Montana, they say.
“It’s an agricultural product,” said Healow, whose wind projects have increased the tax base and made lease payments to Martinsdale-area landowners, where the wind turbines are placed. “This is a way to grow Montana agriculture.
“(Small wind projects) can be installed, maintained and equipped with the talent we have here in the state. It’s pure economic development – new money that was not there before. That, to me, is the principal attraction.”
Montana has about 20 such independent projects already selling power to NorthWestern, but only a couple have started up in the past few years.
In Idaho, where the Utilities Commission has set standard, long-term contracts for qualifying independent power producers, 120 such projects are selling electricity to utilities in Idaho. Most of the projects are quite small.
In fact, four of these projects actually are located in Montana. They’ve been built in the past two to three years and are selling power into Idaho.
However, the IUC is re-examining its policies on small wind-power contracts, at the request of Idaho utilities. The utilities are concerned about the cost of acquiring backup power needed to augment multiple wind projects.
Oregon’s Public Utilities Commission also just updated its rules on these types of projects, setting new rates and requiring 20-year contracts for projects of less than 10 megawatts.
“The reason the commission went to the trouble is that we recognized that we hadn’t seen any (small power project) activity for a quite a while,” said Lisa Schwartz, a senior analyst for the Oregon Public Utilities Commission. “Also, the increase in market prices (for electricity) made them a lot more viable again.”
Project developers say without long-term contracts and a decent price, they can’t get financing to build the project, and it almost never happens.
Ted Sorenson, of Idaho Falls, who has developed small power projects in Idaho and Montana, said the idea is to give smaller projects a chance – and to spread development around rural areas.
“It’s not the big guys who get to do it all, it’s the small guys,” he said. “Why not give the little guys a whack at it?”
Tavenner said it’s fine to have big wind farms like the 150-megawatt project near Judith Gap, but that he’d also like to see scores of smaller wind projects or other renewable-energy projects scattered across Montana.
A good decision from the PSC can make it happen, he says.
“The main thrust is so that we can change our energy future,” Tavenner said. “This is another one of the way to move to renewable energy.”
By Mike Dennison
Gazette State Bureau
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