By Bob Rowe, President and CEO, NorthWestern Energy
NorthWestern Energy strongly supports the development of renewable energy in Montana. We back up that commitment with actions and results.
Over 8 percent of the electricity we deliver to our Montana customers comes from wind and other renewables. This is higher than any other regulated utility in the Pacific Northwest and we are on target to achieve at least 15% by 2015. We’re also committing human resources to understanding how best to integrate wind (a highly variable resource) into our system, and to working with wind developers on cost-effective projects.
Recently, there has been some discussion in the media about NorthWestern Energy’s view of small-scale renewable energy development, particularly in relation to HB 491, the “QF bill.”
Our role concerning wind is twofold: We’re a transmission provider that serves as the pathway between Montana generators and customers both in and out-of-state. We’ve recently added to the services we provide these “wind shippers” and we have enabled a number of them to interconnect to our transmission system. We’re also the local utility providing energy to our customers at rates approved by the Public Service Commission. \
It’s the latter role that is now the main focus when discussing small-scale renewable energy production. However, there is confusion between the large amount of electricity generated in Montana on a peak hour basis (over 3,000 megawatts), the smaller amount consumed in Montana on that same peak hour of about 1800 MW, and the still-smaller amount provided by NorthWestern Energy to its mainly small- and medium-sized customers retail customers of about 1200 MW.
Now working for NorthWestern Energy, and from over twenty years of working on energy policy in Montana, I have some views based on tough experience: Resource planning - taking into account costs, benefits, risks and the value of resource diversity - is important. Both renewable resources and energy efficiency are key parts of a diverse resource portfolio. We’ve suffered as a state when our analysis has been too narrow or we were short sighted. We are all too familiar with the damage caused by electricity deregulation in the 1990s. One result of deregulation was that the real progress being made on resource planning, including renewables and efficiency, was knocked off track. Now, NorthWestern Energy is able to take substantive steps in providing our customers with stable, reliable and responsible electricity supply. We’re back on track, and getting better.
We don’t want to repeat past mistakes. In the 1970’s, Congress, with the best of intentions, required utilities to purchase electricity from “Qualifying Facilities” (QFs) at rates set by the state utility commission based on the concept of “avoided cost.” Avoided cost is the cost that the state Public Service Commission estimated the utility would avoid incurring if it were to build its own generator. Those early QF contracts are expensive compared to current market alternatives. Congress’s laudable intent was to promote diversification of resource ownership and to stimulate the development of renewable generation. The passage of time has made the specific QF mechanism less helpful to good resource planning for NorthWestern Energy: We own less than 25 percent of the generation serving our customers. There is a strong renewable generation market – there is much more wind being developed than coal. There are statutory requirements to acquire renewables.
Experience – and a long, difficult proceeding in the late 90’s here in Montana that resulted in customers and NorthWestern Energy sharing the cost of these extremely high-cost contracts – provide a lesson. Today, a QF should be able to demonstrate that it is a cost-effective, reliable resource with sound operating characteristics and competitive with other available resources, including the cost of the resource and of interconnection. NorthWestern is serious about its process for evaluating and acquiring resources, taking into account costs, benefits, and risks over the long term. Contrary to the argument of some QF developers, if their projects are cost effective, compared to our other choices, they will be selected for the supply portfolio.
NorthWestern opposes HB 491 because it’s a step backward in resource acquisition policy. It is not in the best interest of our customers. Some of the current generation of QF advocates may be sincerely unaware of the relevant past, but it matters. Renewable resources frequently provide the highest benefit for our electric portfolio. Mandates that force NorthWestern to acquire QF’s, regardless of their power quality and characteristics, do not provide this benefit.
The Public Service Commission applies, and NorthWestern is bound by, current QF law. NorthWestern supports research and development into new technologies that are not yet commercially competitive but may become so. We also help fund and participate in programs that target small scale and community-level renewable and efficiency programs.
We regularly survey our customers to find out what they want from their utility. Most tell us that they want cost-effective, reliable, responsible electricity service. NorthWestern is serious about renewable resources and excited about wind’s future in Montana. However, it’s not right for our customers to be forced to pay higher rates because a handful of developers want an un-level playing field that would benefit them at the expense of our customers, and distorting the resource planning process we are working hard to strengthen.
We support renewable energy development that benefits all customers. We also recognize the benefit to local economies from responsible development. The amount of wind and renewables already on our system, coupled with our commitment to build the infrastructure to support wind development, is the best evidence.
About NorthWestern Energy
NorthWestern Energy is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving approximately 650,000 customers in Montana, South Dakota and Nebraska. For more information about NorthWestern Energy, visit our Web site at www.northwesternenergy.com.
Media Contact:
Claudia Rapkoch
(866) 622-8081
claudia.rapkoch@northwestern.com