Electricity rates jump 14 percent

HELENA - Electricity bills for the 295,000 customers of NorthWestern Energy went up 14 percent Tuesday after the state Public Service Commission approved an interim rate change.

The new rates, which will remain in effect while regulators review the utility's request for a permanent increase, boosted the average residential power bill by $7.66 to $62.74 a month.

The increase is less than the 19 percent that NorthWestern wanted in its original request filed last month, but a company official said it was what had been expected on a temporary basis.

''These are true supply costs that we passing through to our customers,'' said Claudia Rapkoch, NorthWestern spokeswoman. ''It's not something we are making a profit on.''

She said about $3.05 of the increase is due to those rising costs of purchasing electricity for delivery to customers. The remaining $4.61 represents the effect of an end to $30 million in credits given customers as part of the deal in which Montana Power Co. sold its transmission system to NorthWestern a year ago, she said.

The interim increase is less than what NorthWestern sought, partly due to the demand for power being less than expected. That's because two large businesses that NorthWestern expected to become customers - Express Pipeline and Cenex - have decided to continue buying electricity elsewhere.

Also, the company and PSC agreed that an $8.8 million accounting error and a big jump in administrative costs do not have to be made up through the interim increase, although they may be reflected in the commission's decision on a final rate increase.

The commission debated whether the interim rate increase should reflect increased costs to buy power for two large customers that had once been supplied by a NorthWestern affiliate.

NorthWestern Energy Marketing recently breached its five-year contract to provide electricity at discount rates to Montana cities and schools, forcing them to seek power from NorthWestern Energy.

Commissioner Tom Schneider of Helena said other ratepayers should not have to cover that cost created by an allegedly illegal action of the marketing affiliate.

But the PSC eventually agreed to include the costs in interim rates since commission regulations require it, unless the cities and schools can find another source of electricity. Robin McHugh, chief attorney for the commission, said the contract dispute is almost certain to end up in court. Should the PSC eventually determine that the costs related to the contract breach should not have been included in the rate increase, it can order a refund, he said.

But Greg Jergeson, commissioner from Chinook, said refunds could be impossible if NorthWestern's financial problems lead to bankruptcy.

The electric rate increase comes on the heels of two 35 percent increases in NorthWestern's natural gas rates for its 151,000 Montana customers.

On Tuesday, NorthWestern asked the commission to reconsider the size of the latter of the two increases, approved July 2.

The rate increase was less than the 45 percent requested, after three of five commissioners decided NorthWestern had not acted prudently in lining up purchases for part of its gas supply.

In its request Tuesday, the utility said the PSC majority ignored evidence and testimony about the actual costs of obtaining the gas for sale to its customers.