NorthWestern Energy customers will see some relief, at least temporarily, from the increased rates the utility has been charging customers for the past month and a half.

Late last month Montana’s largest utility filed an electricity rate structure with state regulators seeking to replace the rate hike the company implemented in late May with a more modest increase outlined in a settlement the utility reached this spring with the Montana Consumer Counsel and about a dozen of its largest customers.

Under the new rate structure, the average Montana household using 750 kilowatts of electricity should expect to spend $115 per month on that portion of their power bill. Under the now-moot rates that NorthWestern put into place without regulators’ approval in late May, that figure was $119.

NorthWestern’s move to roll back some of its earlier rate increase, a possibility the company’s CEO Brian Bird signaled a willingness to do last month, created confusion among the five Republican officials Montanans elected to serve on the Public Service Commission and the state employees who work at the agency. During the commission’s July 1 meeting, commissioners and agency staff grappled with where utility authority ends and commission authority begins, ambiguity in Montana law for such situations and the utility’s motivations for voluntarily backing off its self-implemented rate hike.

The rate NorthWestern incorporated in customers’ bills in May, without regulators’ approval, relied on a little-known, rarely used state law that allows a monopoly utility to adopt its proposed rate structure if the PSC hasn’t acted on its rate hike request within nine months. Under that law, the utility must refund customers any charges the commission deems excessive — with interest.

With a 3-2 vote on July 1, the commission agreed to go along with NorthWestern’s proposal to replace the self-implemented rates with the ones outlined in the settlement. Commissioners Jeff Welborn and Anne “Annie” Bukacek followed the lead of commission Vice President Jennifer Fielder in adopting the recommendation of Lucas Hamilton, the agency’s top lawyer. 

After outlining the legal questions at play and the applicability of a somewhat similar scenario involving a water and wastewater utility in Big Sky named HLH, Hamilton told commissioners at their morning business meeting that maintaining higher rates that even the utility no longer wants would be an “absurd result” and called for the commission to deem the settlement rates appropriate.

“In this particular circumstance, given NorthWestern’s posture, given that no party in this proceeding has advocated for a rate as high as NorthWestern’s originally proposed rate … I would submit to you that it is better to avoid the result where the rates are higher,” Hamilton said.

Fielder moved successfully to codify that approach “so that we can see these rates reduced and see the company stop overcharging customers … effective immediately.”

PSC President Brad Molnar and Commissioner Randy Pinocci voted against Fielder’s motion.

Molnar argued that the commission’s decision in the HLH matter was too dissimilar from the current proceedings to offer a “high-quality guide.”

“The HLH case is very different from NorthWestern Energy’s demand to implement a different rate to replace the current one. The stipulations were agreed to by all and never challenged by the PSC. I don’t think there’s a single penny in [NorthWestern Energy’s] rate case that isn’t contested,” he said. “The [NorthWestern] rate decrease may be illusory and the increase may be simply stalled.”

Molnar offered that the utility may be using the rate decrease as a “communications tool” to shore up public opinion following its unpopular self-implemented increase. He argued that the more prudent course of action would be to ratchet rates back down to the interim rates the commission signed off in late November while the agency considers the mass of filings and late June expert testimony tied to a more permanent rate structure the utility is seeking to recover its costs for its new gas plant and upgrades to its transmission system. 

Asked by Fielder to respond to the viability of that approach, Hamilton offered that Montana statute offers limited support for Molnar’s proposal. The utility would have grounds to increase its rates back up to the full request it sought when it first initiated the rate case proceeding a year ago, he said.

Following the final vote, Molnar said he has no regrets for bringing the matter up and initiating a dialogue between commissioners and PSC staff.

“This is a very important precedent question, with almost no precedent out there to go with. We make, including myself, a big-boy wage. It’s a big-boy job. Staff should not do it back in their offices — the public should see this,” Molnar argued. “I think we are a better commission for having had this discussion. I think the people are better served when we do this in the open. … The commission should have a say.”

If the last NorthWestern rate hike the commission reviewed serves as a helpful guide, the rate structure NorthWestern implemented effective July 1 won’t be in play for long. By the end of the year, the commission is likely to decide how much revenue NorthWestern can collect from its electricity customers. In its early filings, the utility asked its regulators to authorize an additional $164 million in annual collections.

In the coming months, commissioners and agency staff will consider the mountain of material that’s been incorporated in the quasi-judicial rate case proceeding that culminated last month in a two-week hearing at the commission’s headquarters in Helena. Over the next month-and-a-half, NorthWestern and other parties will submit their last round of major filings to the commission for its review.

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