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July 14, 2024

NorthWestern Energy pulls preapproval application for natural gas plant

4 min read

NorthWestern Energy, the South Dakota-based utility company that supplies power to approximately two-thirds of Montana’s residents, has decided to withdraw its application for preapproval of a new natural gas plant.

In a document filed with the Public Service Commission, the elected body that has regulatory oversight of utility companies, NorthWestern said “uncertainties and upheaval in the construction market and challenges to the supply chain due to the COVID-19 pandemic” have driven the company to act quickly in order to secure favorable supply and labor prices for the Laurel Generating Station, a 175-megawatt natural gas plant it plans to build in Laurel.

The company said it plans to recover the cost of building the plant, which four months ago was estimated at more than $286 million, through the ratemaking process it uses for other assets not acquired with preapproval. In the regular ratemaking process, the PSC examines a utility company’s finances and evaluates which assets should be rolled into the rates paid by consumers.

In a Sept. 21 press release, NorthWestern said it decided to forego preapproval to hasten construction of the plant. It said the accelerated timeline should allow the plant to be operational by the 2023-2024 winter season, “perhaps even earlier than would otherwise be the case.”

“NorthWestern Energy negotiated a very favorable price for the plant construction, however the worldwide pandemic caused supply-chain disruptions and contributed to labor shortages across all industries, including the energy sector, that were not fully anticipated during contract negotiations,” CEO Bob Rowe said in the release.

The company had been seeking preapproval of the new resource, a process that allows NorthWestern to guarantee a certain rate of return on investments, thereby insulating it from financial risks associated with acquisitions. The preapproval application timeline laid out in Montana law would have required the PSC to issue a decision on the application by March, barring an extension for “extraordinary circumstances.”

The natural gas plant is one of three assets NorthWestern plans to add to its portfolio in the coming years. The other two are the Beartooth Battery project, which would be Montana’s first utility-scale battery, and a purchase agreement that would allow the utility to secure 100 megawatts of primarily hydroelectric energy from Vancouver, B.C.-based Powerex Corp. NorthWestern had also sought preapproval for the Beartooth Battery project in its application, and said it’s evaluating whether to continue seeking PSC preapproval of that resource.

NorthWestern’s preapproval application for the natural gas plant drew opposition from renewable energy advocates and environmental groups, which have argued that the plant is not in the state’s financial or environmental interests.

In June, Montana Environmental Information Center and Sierra Club filed a motion to intervene in the preapproval application, arguing that the application “is not in the public interest” and that consumer energy rates will be affected by the commission’s decision. Three Missoula residents and climate advocacy organization 350Montana made similar claims in their motion to intervene, asserting that NorthWestern failed to consider “available and alternative resources” including more cost-effective renewable energy options.

Montana Consumer Counsel also entered the preapproval  fray “in order to represent the interest of the consuming public,” as did Colstrip Energy Limited Partnership. CELP’s filing said the partnership is “directly affected by the application” because its existing project — the Colstrip power plant — serves as one of NorthWestern Energy’s current capacity resources. CELP noted that its contract expires in 2024 and it has an interest in ensuring that NorthWestern Energy “enters into appropriate contracts to provide consistent, reliable energy and capacity in the future.”

The timing of NorthWestern’s decision has been flagged by some interveners as suspicious. Anne Hedges, MEIC’s policy director, notes that the interverners’ expert testimony was due Oct. 1.

“It’s hard to say why [NorthWestern] did this but it’s clear that there were no interveners who seemed to support the project,” Hedges wrote in an email.

In a later statement, MEIC said the organization is “extremely frustrated with NorthWestern for wasting the PSC and Consumer Counsel’s time and taxpayer-funded resources, as well as the [interveners’] time and resources on a process that it now wants to abandon.” The nonprofit said it still considers the planned gas plant “severely flawed, outrageously expensive, remarkably risky, and a climate disaster.”

Monica Tranel, the attorney representing 350Montana, said the announcement and filing “seemed a little bit frenetic” and speculated that NorthWestern was reluctant to have opponents’ arguments entered in the public record via the scheduled testimony.

Tranel is also representing 350Montana in a lawsuit challenging the state’s preapproval statute before Missoula District Court Judge Jason Marks. Tranel said preapproval “shifts all of the risk of getting [energy acquisition] decisions wrong” to ratepayers and confers a special privilege to NorthWestern Energy, in violation of the state Constitution. Tranel said the court is expected to hear oral arguments in that lawsuit in November.

This article was originally posted on NorthWestern Energy pulls preapproval application for natural gas plant

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