Developers of small wind power projects in Montana have their eyes on the Public Service Commission this week, as it may decide a crucial price issue affecting their ability to succeed.
NorthWestern Energy, the state’s dominant electric utility and the primary purchaser of wind power in Montana, wants to charge small wind farms for the cost of “integrating” their power into the NorthWestern system, which serves 320,000 customers.
The utility says that if wind power developers don’t pay that cost, NorthWestern consumers end up absorbing it.
“To have a cost shifted to ratepayers, I don’t think is in their best interest,” said John Hines, chief supply officer for NorthWestern.
But developers of small wind power projects that sell, or hope to sell, to Northwestern say the company hasn’t shown that the costs really exist.
And even if some costs do exist, they’re less than the charge that NorthWestern wants to levy, developers say. The charge would all but make it all but impossible for them to do business in Montana, they say.
Damaging to small producers
“If they end up with (a charge) the way NorthWestern has proposed, it’s a serious impediment and it doesn’t reflect the cost of those smaller generators,” said Bill Pascoe, a Butte consultant who works with wind power developers.
“My view is that it’s very damaging to small producers.”
The PSC, the five-member body that regulates utilities in Montana, could decide today whether and how NorthWestern can charge these small projects for integration costs.
Put simply, integration costs are what the utility believes it must pay for additional power to balance the intermittent nature of wind power.
Because production occurs only when the wind blows, NorthWestern or any electric system operator says it must buy what it calls “regulating power” to keep the system within a certain range of voltage.
The cost of that regulating power, which must be available at all times, should be charged to wind power producers, NorthWestern said.
NorthWestern wants to base the integration charge for small producers on what it says are the costs of buying regulating power for the state’s largest wind farm, the 135-megawatt Judith Gap project north of Harlowton.
Under that proposal, small wind power producers would pay from $8 to $22 per megawatt hour of power produced.
Two Dot Wind, the operator of 33 small wind turbines in central Montana, has challenged this charge as unjustified and exorbitant.
NorthWestern buys power from these small wind projects at about $50 per megawatt hour – a price the producers point out is already is below market value and below what NorthWestern customers pay for electricity.
Taking $8 to $22 out of that price for integration costs is unfair and unjustified and would essentially halt all future small wind-power development in Montana, said Mike Uda, the attorney for Two Dot Wind.
“If the commission wishes to drive wind development out of the state of Montana, then it should by all means adopt NorthWestern’s proposal,” Uda wrote in arguments submitted March 27 to the PSC.
Two Dot Wind and others say the costs of integrating small projects’ power is negligible, if anything at all, and certainly should not be calculated based on the cost of a large project like Judith Gap.
Pascoe earlier proposed that the PSC order NorthWestern and small producers to collaborate on a study that examines the cost of integrating power from multiple small projects.
NorthWestern has ignored this request and said the only question is how much in integration costs Two Dot Wind or other small producers should pay.
“It’s not NorthWestern customers’ responsibility to make a business venture work,” Hines said of the claims by small producers.
“We’re not asking developers to subsidize ratepayers, but we’re not asking ratepayers to subsidize (small producers), either.”
By Mike Dennison
Gazette State Bureau
15 April 2008