By Tim Leeds
Montana electricity customers will get a good deal if the Public Service Commission approves Montana Power Co.'s sale of its electricity and natural gas distribution system to South Dakota-based NorthWestern Corp., both companies said at a hearing here Tuesday.
One of the issues the PSC has to approve is MPC and Northwestern crediting about $113 million to Montana electricity consumers, which would translate into a rate reduction both in the short term and the long term.
Stan Dupree of the International Brotherhood of Electrical Workers testified that since MPC doesn't want to be in the power business anymore, the PSC should help facilitate the sale. He likened MPC to rats feeding off the electrical utility business.
The PSC should "play the role of the Pied Piper and get these folks out of town," he said.
If the sale isn't approved, he said, MPC might start laying off employees, harming them and the communities they live in.
MPC employee Pat Patterson of Havre encouraged the PSC to approve the sale. He said that after employees heard MPC was going to sell, they were concerned and uncertain about their future. After they heard NorthWestern was the purchaser, he said, spirits lifted.
He said NorthWestern has a lot of similar values and cultural traditions to Montana and MPC, and that most MPC employees would approve of them. NorthWestern supplies power in eastern South Dakota and in Nebraska and also has interests in natural gas distribution, heating and air conditioning, and telecommunications. It was founded in 1923.
Public Service Commissioner Gary Feland held the hearing in Havre as part of a series of public hearings about the sale. The PSC has to approve the sale and transition costs of the sale by Jan. 31, a deadline the PSC has imposed on itself, before the sale can happen.
The issues the PSC is addressing are separate from a third issue approving the portfolio of energy production NorthWestern would use to provide the energy it will distribute. The PSC would address that issue after deciding whether to approve the sale.
Feland, MPC general counsel Mike Manion, Mike Hanson of NorthWestern and John Bushnell, utility economist of Montana Consumer Counsel, spoke at the hearing. MPC, NorthWestern, Montana Consumer Counsel, Commercial Energy and the Large Consumer Group are all part of the stipulated agreements. Commercial Energy provides electricity to middle-sized consumers like retail stores, and Large Consumer Group represents large industrial electricity consumers.
Energy deregulation, passed by the Montana Legislature in 1997, allowed consumers to choose which electricity providers customers would receive power from. State Rep. John Musgrove, D-Havre, said the choice was questionable because of the selections available.
"The choice was more or less a Hobson's choice you can make any choice you want but have to choose the one closest to the door," he told the commission.
Musgrove said testimony indicated the sale to Northwestern is "a good choice before us today. It's probably as good as it gets."
One of the proposed agreements the parties presented to the PSC would credit consumers for $30 million. MPC would provide $20 million of the credit and NorthWestern would provide $10 million. The reduction would apply to rates until the credit was used up in about one year.
Bushnell said the reduction would reduce the proposed rate increases when deregulated energy prices take effect in July, from 20 percent to 12.8 percent. After the credit is used up, the rate will jump to 20 percent above current rates.
The agreement also reduces the amount charged to electricity customers to make up for expenses MPC was forced to incur by a 1978 federal law. Hanson said the law was passed because of the energy crisis and OPEC oil embargo in the 1970s, and requires energy companies to sign contracts with qualifying alternative energy plants. The law was passed to encourage creation of alternative plants, like coal-fired and wind-powered generators.
MPC signed contracts for up to 30 years from qualifying plants, and has 28 years left on some of the contracts.
The Montana Legislature, as part of energy deregulation, determined that MPC can charge customers to make up the difference between the contracts it was forced to enter and the actual cost of electricity, which was expected to drop because of competition created by deregulation.
The agreement will eliminate $23 million of these "stranded costs" that some customers already owe, and will eliminate $60 million more of stranded costs that will be charged to all MPC consumers over the next 28 years.
A point made repeatedly by the four officials holding the hearing is that the stranded costs will be charged whether the sale is approved or not. The costs, which have already been reduced by about $60 million in previous actions, now amount to about $305 million to be collected over the next 28 years and won't be reduced unless the PSC approves the sale.
Bushnell said the amounts reducing the stranded costs is the middle ground the five parties were trying to reach.
"We think we've reached a fair settlement of these costs," he said.
State Rep. Matt McCann, D-Harlem, said he's not sure the agreement is in the best interests of consumers. He cautioned the PSC not to rush into a decision, and to make sure it does the best job it can in making a decision on the portfolio issue, which will determine what the rates will be.
"How is this a good deal for us? Take your time. Make a good deal and a good choice for Montanans," he said.
Feland pointed out that the PSC has been considering this sale for more than a year.
"This isn't something we've just rushed into. We've been working on this a long time, but I think we have to make a decision, too," he said.
Feland said after the hearing that a lot could change when the commission decides on the portfolio. The actual increase could be smaller than the 12.8 percent predicted.
David Hoffman, administrator of the PSC's utility division, said after the hearing that customers receiving both natural gas and electricity might have a pleasant surprise when the new rates go into effect. He said that because of the drop in natural gas costs, a typical customer might see a drop of about $6 on their bill even with a 12.8 percent electricity increase.
Hanson said NorthWestern is interested in coming into Montana and staying in the electricity business.
"We intend to be here a long, long time," he said. "We intend to grow this business."
Feland said after the meeting he expects the PSC to take up the issue for a vote on Tuesday, although it might take a few days of discussion to make a decision.