MATT GOURAS Associated Press Writer
HELENA NorthWestern Energy announced a new power deal Wednesday with its largest supplier, PPL Montana, saying the seven-year power contract provides electricity below market prices. The deal will result in a 7 percent increase in typical customer bills when it goes into place in July 2007, the company said. NorthWestern, which earlier this year lobbied federal regulators to declare PPL a monopoly, said the new power purchase agreement will stabilize customer prices. “Electric supply continues to be one of the most significant and challenging issues we face at NorthWestern today,” Mike Hanson, NorthWestern president and CEO, said in a release. “There is probably no single item that receives as much time and attention.” NorthWestern has been criticized in the past for not locking PPL into long contracts that would shield customers from sharp electricity price increases. “I think it’s probably a good sign that they did get a contract; the consumers were at risk the longer we went without NorthWestern and PPL coming to terms,” said Public Service Commission Chairman Greg Jergeson. NorthWestern is not asking for pre-approval of the deal from the PSC, so regulators likely won’t review the contract until late in 2007 or early 2008 as part of a “prudence review.”
The company is going through a buyout from Australian-based Babcock & Brown Infrastructure, hoping to close the deal early next year if the $2.2 billion offer passes muster with regulators and stockholders. NorthWestern has also said it plans to pursue legislation that would allow it to build its own power plants, something banned under the deregulation law that allowed the old Montana Power Co. To be split up in the first place. The new deal with PPL calls for the company to get 37 percent of its electricity from PPL. Right now, the company gets about 55 percent of its power from PPL, said NorthWestern spokeswoman Claudia Rapkoch. NorthWestern plans to fill out its portfolio with deals it has for wind power and other sources, and it is holding an auction later this year for electricity. Because of the work involved in sealing deal with PPL, a test auction that was planned for last month has been delayed, Rapkoch said. Under the life of the deal, NorthWestern will buy 13.7 million megawatt hours at a cost of approximately $675 million. The actual price NorthWestern will pay PPL for the electricity will go up roughly 30 percent, but because of the anticipated blend of other sources of electricity, customer bills are expected to go up only 7 percent, Rapkoch said.
NorthWestern said the cost of electricity increases over the seven-year agreement at a rate that is less than inflation. The amount it has agreed to buy gradually decreases to about 24 percent of its portfolio by 2014 so it can pursue other options for getting electricity, the company said. “What we want to do is diversify our resource mix so that we are taking advantage of a number of products and not, as the old saying goes, putting all of our eggs in one basket,” Rapkoch said. NorthWestern, doing business as NorthWestern Energy, provides electricity and natural gas to more than 628,000 customers in South Dakota, Montana and Nebraska.