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Our View of Montana House Bill 189 - Power Cost Tracking Adjustments

Jan 26, 2015 |

Last week you may have seen an op-ed in reference to HB 189.  The bill would prohibit NorthWestern Energy from including in what is called a “power cost tracking adjustment” any power purchased in the open market because of the temporary outage of a generator providing power to NorthWestern’s customers.  According to the op-ed, only NorthWestern Energy has such a power cost tracking adjustment, and is using it, in the words of its writers, Rep.  Tom Woods and Rep. Randy Pinocci, to “double dip” its customers.  The truth of the matter is much different than portrayed by the two legislators.

Most utilities, both gas and electric, including those who do business in Montana, have such tracking adjustments.  They are designed to reflect in rates, dollar for dollar, the short-term price of natural gas or electricity purchased to meet the demands of the utility’s customers.  The price of natural gas or electric power in the open market drops, and the tracking adjustment captures that change in the price of open market purchases, and credits it back to the utility’s customer.  They also work in the other direction.  The cost of gas or electricity in the open market increases, and the increased cost of open market purchases are charged to the utility’s customer through the tracking adjustment.

Electricity is generated by machinery, and machinery needs service.  Sometimes a generator, whether powered by coal, water or wind, simply breaks down, and needs to be fixed.   Whether planned or unplanned, these outages happen to every utility or independent power producer.  When they do happen, the utility that was receiving power from the generator typically turns to open-market purchases to meet its customers’ demands until the generator is back on line.

House Bill 189 would prohibit NorthWestern from including in its power cost tracking adjustment any power it purchased because of a generator outage.  As an example, NorthWestern is required by federal and state law to purchase power from the State of Montana’s Toston Dam facility. House Bill 189 says that if NorthWestern has to make open-market purchases because the Toston Dam facility is off line for scheduled service or equipment failure, NorthWestern cannot include the cost of those purchases in its power cost tracking adjustment.  That just doesn’t make sense.  It is also unreasonable, and unfair.  The same unreasonable and unfair result would occur for every generator providing power to NorthWestern, whether the generator is a qualifying facility like the Toston Dam, a wind farm like the one near Judith Gap, or the generators owned by NorthWestern itself.

The writers of the op-ed attempt to justify such unreasonable and unfair results by arguing that only NorthWestern Energy has a power cost tracking adjustment.  That just isn’t true. 

John Alke
Corporate Counsel

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