BILLINGS — NorthWestern Energy would have to walk away from a $900 million deal to buy 11 hydroelectric dams in Montana if forced to make changes recommended by the state Consumer Counsel, an executive for the South Dakota-based utility said Thursday.
NorthWestern Vice President John Hines said the utility would have to go to the open market to get more power if the deal with PPL Montana falls through, which could drive up rates.
The Montana Consumer Counsel is a state agency that represents consumers in utility hearings. It says the deal as proposed would pass along too many costs to consumers and increase electricity bills more than twice as much as NorthWestern has claimed.
The Public Service Commission must approve the deal with PPL. Commissioners on Thursday in Billings held one of a series of listening sessions on the proposal, with most people who commented voicing their support.
A public hearing on the matter will be held in Helena in July, with a final decision in September. NorthWestern serves 342,000 electricity customers in Montana.
NorthWestern and PPL Montana worked on the deal since last summer and announced the sale agreement in October. PPL bought the dams on the Missouri and Clark Fork rivers from Montana Power Co. during deregulation in the late 1990s and early 2000s. Combined, the 11 dams have capacity to generate 633 megawatts of electricity, or as much as a large coal-fired power plant.
As a merchant utility that sells power on the market and not directly to Montana consumers, PPL does not fall under the auspices of the PSC. NorthWestern does, which gives the state more influence over the utility company’s decisions.
Consumer Counsel attorney Monica Tranel said NorthWestern inflated the size of the hydro deal by adding in the costs of anticipated environmental regulations that could make electricity more expensive in the future. She referred to those costs as a “carbon tax” and said they had driven up the purchase price by about $250 million — a cost that NorthWestern would be able to pass on to ratepayers if the PSC approves the deal.
“This shifts the risk from the shareholders to the ratepayers,” Tranel said. “Their incentive is to get the highest possible price they can, knowing they can pass that cost on to you.”
Hines said NorthWestern’s offer for the dams would not be viable if it had not factored in the costs of future regulations. He said PPL simply could find another buyer willing to pay a higher amount. Despite an immediate increase in rates — about 5 percent, or $4 per month on the average residential bill — Hines said prices would stabilize over time for its Montana customers even if market prices elsewhere go up.
Gary Buchanan, a Billings investment adviser and former director of the state Commerce Department, said Montana can never regain what it lost when the dams were sold. But he said a sale to NorthWestern would ensure that they were not bought by a hedge fund or other investor with no obligation to consumers and that could ship the electricity generated out of state.
“The genie will never go back,” Buchanan said. “It really is important who owns these things.”