February 15, 2012
Montana

PSC approves wind power deal on 3-2 vote

By MIKE DENNISON IR State Bureau, Independent Record, helenair.com 15 February 2012

The state Public Service Commission Tuesday endorsed NorthWestern Energy’s proposed purchase of an $86 million, north-central Montana wind-power project, which would become the largest wind farm owned by a Montana utility.

The commission granted “pre-approval” of the purchase on a 3-2 vote, essentially giving the go-ahead for NorthWestern’s contractor, Compass Wind, to start construction on the 40-megawatt Spion Kop wind farm southeast of Great Falls.

If all goes as planned, the project would be completed by year’s end and NorthWestern – the state’s largest electric utility – would take possession and begin operating the project.

However, a NorthWestern spokeswoman said the company wants to review the PSC’s final order before going ahead with the project.

Claudia Rapkoch noted that the five-member commission’s approval changed a revenue provision that could affect the project’s potential long-term income for the company.

“Two Republican commissioners, Bill Gallagher of Helena and Brad Molnar of Laurel, voted against approving the project, saying that allowing NorthWestern to buy the project and charge the costs to ratepayers transfers too much risk to the customer.

Molnar said NorthWestern and could shift the risk of its variable costs away from the consumer by arranging to buy just the project’s power, on contract, rather than the whole project.

“If they think the energy is that valuable to the ratepayer … they don’t need to own it, to get that,” he said. “The risk is shifted to the consumer the moment NorthWestern buys (the project) and it is rate-based.”

The “rate-basing” of a project means its costs are placed in rates, and the owner – in this case, NorthWestern – gets to earn a regulated return on that investment, through the rates it charges customers.

PSC Chairman Travis Kavulla, R-Great Falls, said evidence presented in the case shows that the overall cost of power produced by Spion Kop will be a good deal for consumers, for years to come.

“I couldn’t care less if it’s a wind project, a gas-fired plant, or a coal-fired plant … it’s just a dollars-and-cents thing to me,” he said. “And that’s the basis on which I’m making my decision today.”

PSC staff analysts estimated that adding Spion Kop to the mix of electricity resources controlled by NorthWestern would cause rate increases of 0.5 percent to 1 percent in the next two years, and possibly lower prices in the long term.

Kavulla joined Democratic commissioners Gail Gutsche of Missoula and John Vincent of Gallatin Gateway in the majority to grant pre-approval for NorthWestern’s purchase of the project.

Kavulla also added a provision to the approval that he said would lessen the risk of consumers paying a higher per-unit cost for the power, if the project doesn’t produce as promised.

The provision, approved on a 4-1 vote with Gutsche opposed, says if the project doesn’t produce at least 118,000 megawatt hours of power annually for its first three years, rates will be reduced.

Gutsche objected, saying the commission hasn’t imposed similar restrictions on other types of power plants.

Rapkoch said this provision changed an agreement between the company and a state consumer-advocate office on the rate of return that NorthWestern can earn from the project.

The Spion Kop project will be built near Raynesford, about 60 miles northwest of the Judith Gap wind project, which is the only other large-scale project supplying wind power to NorthWestern. Judith Gap is a 135-megawatt project, but it is owned by Invenergy, which sells the power to NorthWestern on contract.