In a meeting with commissioners Tuesday, attorney Al Brogan outlined a number of concerns he said he had about NorthWestern Corp.'s plan, which was filed last week.
Brogan said it is premature to say if NorthWestern's proposed rates under the plan would be just and reasonable, or whether its proposed increases in capital spending and maintenance are adequate.
He also discussed NorthWestern's restated financial results it filed with the Securities and Exchange Commission on Monday. NorthWestern originally reported $3.5 million in net profits for December 2003, but restated the results to show a $22.3 million net loss for a negative swing of $25.8 million.
NorthWestern said it doesn't expect to raise utility rates for at least five years. That does not include actual increases in the costs of electricity and natural gas supply, which NorthWestern buys on the open market. These commodity price increases are passed on to consumers.
Brogan said the PSC wants NorthWestern's rates to be just and reasonable. But Brogan said it's impossible to conclude, based on the information the company provided, that the rates will be just and reasonable.
NorthWestern is the parent company of NorthWestern Energy, which provides electricity to about 300,000 customers in Montana and natural gas to about 157,000.
The company, which also operates utilities in South Dakota and Nebraska, said it intends to increase its capital spending in 2004 to $77 million and wants to spend $287 million more from 2005 to 2008.
The company is in the process of hiring a third-party engineering firm to evaluate its utility system's integrity and reliability, Brogan said.
The PSC staff will need to determine whether this spending is enough to ensure that service quality in Montana won't deteriorate, he said.
NorthWestern spokesman Roger Schrum and other NorthWestern officials have said the reason the company is hiring the third party is to get an independent evaluation of the quality of its system.
Brogan said the PSC also wants a "ring-fenced" Montana utility that would separate the Montana assets from those of the rest of NorthWestern to protect finances. NorthWestern's Montana utility has been profitable, while the corporation's non-utility assets _ some of which have been sold off _ have lost money.
Brogan said NorthWestern has proposed ring-fencing its regulated energy and utility businesses and assets so they are owned by the reorganized parent company. Its non-regulated energy and utility businesses would be held in wholly owned subsidiaries. Brogan said he does not believe that arrangement protects the utility business from the non-utility operations, adding: "If it did, we would not now be in this predicament."
Schrum, however, said NorthWestern doesn't believe the ring-fencing arrangement the PSC advocated is legal under the U.S. Public Utility Holding Company Act.
Another concern, Brogan said, is NorthWestern's proposal that its new seven-member board be made up of the company's chief executive officer and six people appointed by the creditors' committee. Brogan said there are no requirements for board members to have any expertise in utility issues.
Schrum said NorthWestern and the creditors' committee share a desire to have some regulatory expertise on the board. The plan, he said, says that the company hopes to have a Montana resident on the board.
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