Residential customers of NorthWestern are now paying 10.2 cents per kilowatt hour (kwh) for electricity. An average household consumes 750 kwh per month.
That rate is 20 percent higher than the second-highest major utility electric rate in the region, which is 8.4 cents per kwh, charged by Black Hills Power in western South Dakota.
It's been 10 years since NorthWestern's predecessor, Montana Power Co., embarked on its ill-fated path of utility deregulation, selling off its power plants and forcing itself to buy electricity for customers on the open, unregulated market.
Since then, market prices for electricity have mostly gone up, up and up - leaving NorthWestern's 320,000 customers at the mercy of that market. Its rates have risen about 75 percent during that time period.
“Everyone knows that (the high price) is because NorthWestern doesn't own any of its own (power-generating) resources,” said John Hines, chief energy supply officer for NorthWestern.
“It's no different than renting versus owning a house,” he continued. “Over time, the rental rates escalate, and the renter has less control over what they pay.”
Nearly all other major utilities and large electric cooperatives in the region own power plants, which they use to meet all or part of their customers' electricity demand.
Their rates are based largely on the cost of building and maintaining these plants, plus a reasonable “rate of return” for the utility. The result has been mostly stable rates for these customers and, in the case of nonprofit cooperatives and municipal utilities, occasional rate decreases.
Seattle City Light reduced its rates last year, and Tacoma (Wash.) Power “hasn't had a rate increase in at least four years,” said utility spokeswoman Chris Gleason. Tacoma Power, which serves 162,000 customers, owns seven hydro-electric dams that provide nearly half its power, and buys the remainder from the federal Bonneville Power Administration.
Still, impacts from the record-high electricity market are being felt at many other regional utilities, which often have to buy extra power to serve their customers. The utilities also face increased costs in other areas, such as expanding transmission systems.
Seven major electric utilities in Washington, Oregon, Idaho and Utah either have rate increases pending before state regulators or plan to ask for an increase this year. The requested increases range from 9 percent to 12 percent.
“We've spent $574 million in the past three years on upgrades to our transmission (lines),” said Dennis Lopez of Idaho Power Co., which just filed for a 9.9 percent electric rate increase. “We're investing heavily in our system, so we're trying to recover that (in rates).”
Last month, the Montana Public Service Commission gave final approval to a 2 percent electric rate increase for NorthWestern Energy, to pay for increased cost of transmission. The rate hike, in effect since January, was NorthWestern's first increase for transmission costs since 2000.
Montana-Dakota Utilities, which serves 24,000 electric customers in far eastern Montana, also had its first overall rate increase this spring in 20 years. Still, its Montana customers are paying an average cost of only 7.2 cents per kwh, or 30 percent less than rates charged by NorthWestern Energy.
MDU, exempted from the state's 1997 utility deregulation law, has remained as a fully regulated utility, obtaining most of its power from its own power plants.
NorthWestern's electric rates have increased about 75 percent since the deregulation law passed, as the company has been forced to buy nearly all its power on the open market.
Hines said NorthWestern hopes to start moving out of the market in the ensuing years, by building new plants and buying into long-term contracts or shares of existing plants, like the Colstrip 4 power plant.
The 2007 Legislature passed a law allowing NorthWestern to make such investments and charge customers for the cost - if the power is dedicated for customers.
Just last month, NorthWestern proposed that customers buy its share of Colstrip 4 power. State regulators must decide whether the cost proposed by NorthWestern is a fair price, and whether it properly purchased its share of Colstrip.
Rebuilding a regulated electric utility that controls its own power sources may raise rates even more in the short term, but will pay off over time, as customers have access to that power for many years at a relatively fixed cost, Hines said.
“Over the long run, it will stabilize NorthWestern rates to a large degree, and make us more comparable to other utilities (in the region),” he said. “It's our hope over time to lessen our reliance on the market.”
Flathead Electric Co-op plans power from dump
Missoulian State Bureau
KALISPELL - Flathead Electric Cooperative, the second-largest electric utility in Montana, will be looking for new power sources come 2011 - and one of those will be the county dump.
The co-op, which has 47,000 customers in the Flathead Valley and Libby, plans to collect methane from the Flathead County landfill and use it to power a generator that will create 1.6 megawatts of electricity.
“In essence, everyone's trash will become everyone's treasure,” says Ross Holter, director of energy services for the co-op.
The nonprofit co-op currently gets 100 percent of its electricity from the federal Bonneville Power Administration. Its customers pay some of the lowest power rates in the state, at 5.7 cents per kilowatt hour.
Yet its contract with BPA must be renewed in 2011. Co-op spokeswoman Wendy Ostrom-Price says by then, BPA won't be able to supply enough power to meet the co-op's demand.
“For 5 percent of our power or more, we'll have to look elsewhere,” she says. “To that end, our managers are looking at every source available.”
The 135-acre landfill near Kalispell has been collecting methane gas produced by decaying garbage and burning it, to prevent the greenhouse gas from escaping into the atmosphere.
By next year, the gas will be used to drive a 1.6-megawatt generator hooked up to Flathead Electric's electricity distribution system. The generator will produce enough power for 900 homes, Ostrom-Price says.
The project, financed by $3.5 million in federal clean renewable energy bonds, should pay for itself in about 15 years, Holter says.
As the landfill grows, the co-op may add another methane-powered generator, Ostrom-Price says. The co-op also is looking into co-generation projects at Plum Creek Timber Co.'s mill in the valley, she adds.
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