Northwestern sues PSC over gas rate rejection

HELENA (AP) - NorthWestern Energy filed suit Monday against the state Public Service Commission over the panel's decision to cut NorthWestern's request for a natural gas rate increase.

In a written statement, the company said the PSC's ruling prevents NorthWestern from recovering more than $6 million in actual natural gas costs it incurred over the winter, and that its decision ''ignored the advice of the PSC staff and the Montana Consumer Counsel.''

The company's lawsuit, filed in District Court in Helena, claims the company could potentially lose another $6 million because of the decision.

Robin McHugh, an attorney for the PSC, said Monday that commissioners had not been served with the lawsuit and couldn't comment. But he added that it was not unexpected.

''We had informal indications from them that they were going to file for judicial review or some kind of lawsuit against the PSC as a result of the order,'' he said. ''But I have not seen what has been filed and therefore couldn't comment at this point.''

Earlier this month, the PSC voted to disallow part of NorthWestern's natural gas costs. As a result, the commission was able to reduce the utility's requested 45 percent temporary natural gas increase to 35 percent.

Last week, NorthWestern asked the PSC to reconsider its decision. The PSC - on a 3-2 vote - declined, reiterating the majority's declaration that the utility made bad decisions and was partly to blame for big rate increases for natural gas customers.

The decision last week went against the advice of the PSC's staff.

Another PSC attorney, Martin Jacobson, said at the time that he believed the PSC had ''violated some constitutional rights of NorthWestern Energy.''

Commissioners acknowledged last week that the PSC likely would not have the final word on the disputed natural gas case. Commissioners and their staff openly discussed the likelihood that NorthWestern would take the matter to court.

The company contends in its lawsuit that the majority of commissioners acted ''arbitrarily and capriciously'' in disallowing a substantial portion of the company's actual gas costs from the 2002-2003 heating season.

Additionally, the company contends the PSC ignored its previous orders and practices regarding other companies when it decided that NorthWestern Energy had acted imprudently by not lining up some fixed-price natural gas contracts for its 156,000 Montana customers.

NorthWestern Energy is a subsidiary of NorthWestern Corp., which bought the former Montana Power Co.'s energy distribution system.