FERC approves initial NWE 53.8 percent rate increase pending settlement discussions

Thursday, July 11, 2019

By Eleanor Guerrero

CCN Senior Reporter


On July 9, Carmen Citron, the Chief Administrative Law Judge, for the Federal Energy Regulatory Commission (FERC) which oversees utilities, issued an order stating that a settlement judge must be appointed to assist the parties in Vote Solar, et al, the smaller solar case, in reaching a settlement of issues. 

The FERC ruling brings the rate increase question to the settlement stage but found sufficient reasonableness in the amount requested that may or may not be modified by settlement negotiations. 

FERC said, “Northwestern states that, in its proposed OATT revisions, NorthWestern proposes an overall increase in its transmission rates from $3.16kW month (53.8 percent) to $4.831 kW month which reflects an increase in NorthWestern’s overall cost of service that has occurred since its current stated transmission rates went into effect in 2006.” 

While utilities argued that NWE benefited from a 14 percent reduction in its corporate tax rate due to the current administration’s tax cut, FERC found that instead, it appeared NWE was due an increase. “NorthWestern argues that no revisions to its current transmission rates are necessary because NorthWestern has offsetting increases in other expenses. NorthWestern supported its argument by providing evidence of increased costs which act as an offset to the benefits of the reduced federal corporate income tax rate…NorthWestern’s proposed revisions to its OATT are hereby accepted for filing and suspended for a nominal period to become effective as of July 1, 2019, subject to refund, as discussed in the body of this order.”

The FERC decision now goes to a settlement hearing between the parties. A judge has recently been appointed as agreed between the parties to oversee the settlement. 

In the meantime, there will be an increase in costs to utilities using NWE transmission lines, including Beartooth Electric Cooperative, Inc., (BEC) and of course, NWE members.

Should there be a lower rate agreed to there will be a refund to BEC and NWE customers. It is hoped that this will be the case. 

For the immediate future, the increase in costs to BEC will not come from any rate increases to members but only from Capital Credits. There is at least half a million in Capital Credits in the fund currently. 

As for those in Carbon County who get their electricity from NWE, their rates will likely increase. According to NWE’s website, “The typical bill impact of the proposed interim rates for a residential customer using 750 kilowatt hours per month would be an increase of 2 percent, or about $1.75 per month.”

According to Kevin Owens, Beartooth Electric General Manager, he was surprised that the 53.8 percent raise in transmission rates requested by NorthWestern Energy has been approved by FERC.  

Owens said, “What is shocking is that FERC approved their full request, subject to refund after a multi-month hearing process.  Consequently we’ll be paying 53.8% more for transmission service from NWE beginning July 1. This action will not immediately impact rates to members but it will certainly impact margins allocated to members annually.”

Owens said, “BEC takes delivery of its power supply through NWE’s transmission system at 10 delivery points (substations).  Consequently, the proposed increase would impact BEC’s transmission delivery budget by approximately $250,000 per year. BEC has intervened with FERC on this matter and will continue to monitor and review the process and work with other impacted parties.  BEC’s OATT intervener filing is available on BEC’s website.

As of July 1, FERC has approved NWE’s filing subject to refund after an extended hearing process where NWE will have to defend all objections brought forth by all of the interveners in the case.”

Owens said, “I can’t see this impacting member rates for the foreseeable future” and noted that the Montana Public Service Commission (PSC) does not have jurisdiction to approve or disapprove FERC rulings. 

NWE has also filed a request for a general electric rate review with the PSC, the first such request since 2009. According to its website, “For a typical residential customer, the proposed increase would mean an average monthly bill increase of $6.37 per month, or about 7.4 percent. About 80 percent of NorthWestern’s roughly 370,000 Montana customers are residential.”

NWE also requested a new class to be charged, those using net metering. It will not apply to existing net meter customers using alternative energy but new ones will be charged if approved.

It further states, “NorthWestern is proposing a more sustainable pricing structure for residential customers who generate some of their own electricity and sell it back to NorthWestern and its customers. This proposal creates a ‘demand charge’ that better reflects the cost of providing service to future self-generating customers. These costs are currently paid by other customers. The proposal will not affect the roughly 2,000 NorthWestern residential customers who currently generate their own electricity.”

The complex rate formula set forth by NWE is also heavily contested by the utilities in the action (which now includes BEC, which recently intervened) as lacking sufficient supporting evidence. One utility complained that this makes the formula difficult to dispute or confirm.

Other NorthWestern issues were recently contested, some of which still exist in the 20th Judicial Circuit case in Cascade County District Court (see this page) regarding contract terms (finalized as acceptable at 25 years), application of a symmetry formula (should not be applied to non-Qualifying Facilities) as well as what avoided carbon costs, avoided energy costs of operating a new resource, and undervaluing the capacity contribution of solar QF solar companies, should be allocated. Check CCN for further updates.