HELENA – NorthWestern Energy, the state’s largest electric utility, is attempting to use the courts, the Legislature and state regulators to severely restrict any new power it must buy from small, independent wind power projects in Montana.
NorthWestern says it’s merely trying to manage its electricity “portfolio” and prevent unneeded costs of these contracts from being foisted on consumers.
“There is a limit on how much (wind power) we can have and still have a reliable portfolio for customers,” says John Hines, NorthWestern’s vice president of electric supply. “There is only so much intermittent (power) supply we can have in our portfolio without substantial changes that we must make.”
The company says its actions are in response to a Public Service Commission order last year that could allow numerous new, small wind power projects to demand and get contracts to sell their power to NorthWestern, which passes on the cost of that power to its 300,000-plus electric customers in Montana.
But developers of small, independent projects and others say NorthWestern’s full-court press is little more than a monopoly utility trying to block power production it doesn’t own.
“For whatever reason, they’ve decided that wind from independent producers is something they want to quash,” says Marty Wild, a wind engineer and developer from Fairfield.
“It’s all about competition and it’s all about them being the only ones supplying power to their ratepayers,” adds Jeff Fox of the Renewable Northwest Project, a group that promotes wind power. “They don’t want anybody else in their little fiefdom operating.”
NorthWestern admits it wants to own more of its power generation, but notes it owns only about 30 percent now – which Hines says belies the argument that the company shuns outside power.
Nonetheless, NorthWestern is carrying out a battle in all branches of government over how it deals with small, independent renewable power projects known as “qualifying facilities,” or QFs.
Federal law and Montana Public Service Commission rules dictate that NorthWestern must accept certain contracts to buy electricity from wind power QFs of 10 megawatts or smaller.
Late last fall, the PSC set new rates for the contracts and also voted to remove a 50-megawatt limit on the aggregate amount of power from wind QFs that NorthWestern had to buy.
NorthWestern responded in December by going to court, asking a state district judge in Helena to overturn parts of the PSC order, including removal of the 50-megawatt limit.
The company also helped craft House Bill 188, which would tightly restrict which wind power projects can get contracts. The bill, supported primarily by majority Republicans, still faces votes in the Montana House before final passage.
Finally, the company asked the PSC this year to reinstate the 50-megawatt limit, while the court case is decided. The PSC – with three newly elected Republican members – agreed Tuesday on a 4-1 vote, going against the recommendation of its legal staff.
Commission Chairman Bill Gallagher, R-Helena, said the PSC majority felt ratepayers and the company could be irreparably harmed if new QFs are allowed to get contracts above the 50-megawatt cap, which could be reinstated by the court later.
Allowing a rush of new QF wind projects to gain contracts would create more costs for NorthWestern, which passes those costs on to ratepayers, and obligate NorthWestern to buy power at above-market prices, Gallagher said.
Republican Travis Kavulla of Great Falls was the sole commissioner to vote against reinstating the 50-megawatt limit.
Kavulla said there’s no evidence that adding more QF wind projects would hurt ratepayers, and said he thinks NorthWestern is simply trying to block any power projects not its own.
NorthWestern needs “a stable, long-term supply portfolio (of electricity)” for its customers, but it’s good to have a mix of utility-owned and independent projects supplying that power, he said.
“I think competition is good, and QF regulation provides a very modest opportunity to inject a little bit of competition into an otherwise unfree market,” he said. “NorthWestern, if it doesn’t win at one place, will simply shop for another venue to get its way. It’s classic monopoly behavior to try to co-opt one branch of government to stamp out competition.”
NorthWestern’s average electricity demand for its customers is about 725 megawatts. Of that, only 30 megawatts come from small QFs wind projects. Another 20 megawatts of wind power has been contracted but isn’t yet operating.
NorthWestern pays, on average, about $60 per megawatt-hour for all power in its portfolio.
It’s paying an average of about $67 per mwh for wind QF power, and QFs entering into contracts now must sell at about $50 per mwh. Most of the QF contracts run 20 or 25 years.
Hines says while the price of QF power is close to what NorthWestern pays for all power, the better comparison is to what the company can buy now on the market, from other sources. He says the company could arrange some several-year contracts that average in the $30 to $40 per mwh.
He also notes that an additional 120 to 130 megawatts of small, independent wind projects have been proposed. If the company is forced to take many of these projects, NorthWestern will have too much intermittent wind on its system, likely forcing it to shop for other power to fill in the gaps, he says.
Wind power producers say these fears are clearly overblown and designed to frighten policymakers into doing NorthWestern’s bidding and make it difficult if not impossible for small wind power projects to get a contract with the company.
Wild says he doubts many of the 120 megawatts of proposed wind power projects will materialize, and for the few that might, NorthWestern should buy them, because they’re reasonably priced at $50 per mwh and are a benefit to rural communities.
Mike Uda, a Helena attorney representing wind producers, says NorthWestern has signed only a handful of contracts with small producers in recent years, and the impact to its system just isn’t that significant.
He also notes that NorthWestern bought its own 40-megawatt wind project last year, and didn’t raise a chorus of objections about fitting it into the system.
“All we’re asking to do is have the opportunity to develop projects in Montana at … what it could cost NorthWestern to do it,” Uda says. “They don’t get their way, and the first thing they do is run off to court. The bottom line is, they’re bullies.”