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Mont. Senate panel blocks bills to give PSC more control of NorthWestern's rates

Legislation to give the Montana Public Service Commission more authority over NorthWestern Corp.'s electricity rates was blocked by a state senate energy panel after overwhelmingly passing the House. The Senate Energy and Telecommunications Committee on March 28 tabled House Bill 475 and H.B. 193 to keep them from passing to the Senate floor, the bills' sponsor, Rep. Tom Woods, said by phone.

Committee Chair Sen. Duane Ankney proposed to send them to a study committee that reviews legislation between sessions, but Woods said the bills have the PSC's full support and need no further study. Woods expressed hope that he could still persuade the committee to move the bill, or persuade a majority of senators to pry the legislation out of the committee. If not, Woods said he will bring the bills up again in the next session.

During an Energy and Telecommunications Committee hearing on March 21, Commission Vice Chairman Travis Kavulla said the PSC's hands are tied because it can only review the utility's rates if and when the company files a rate case. NorthWestern has not brought a rate case before the commission in nearly eight years, Kavulla told the panel.

"In this case regulatory lag, ironically has helped NorthWestern capture profits that are well above their peers of other regulated utilities and well in excess of market returns elsewhere in the United States," Kavulla said.

Utilities typically file rate cases when they no longer earn their authorized rates of return. NorthWestern is earning above-market returns, said Kavulla. In the past few years the company has earned between 10.3% to more than 11% return on equity.

H.B. 475 would give the PSC authority to require NorthWestern to submit rate cases in order for the regulators to conduct full reviews of the utility's expenditures and profits whenever the commission deems it necessary. Woods said he would like the bill amended to require a rate case every three years. NorthWestern lobbied against the bill. NorthWestern also opposed Woods' H.B. 193, which would end automatic power cost adjustments for NorthWestern through its electricity tracker. Montana Consumer Counsel representative Jason Brown said the bill would still allow the utility to recover costs, but the company would have to prove those costs were prudently incurred. Under the current system the utility has no incentive to hold down costs since it can automatically pass them on to ratepayers, Brown said.

Another bill, H.B. 189, would have given the PSC authority to review NorthWestern's rates by repealing an automatic rate adjustment for property taxes. The House Energy and Technology Committee held the bill and allowed a transmittal deadline to lapse, effectively killing the legislation.

NorthWestern is the state's largest electric and gas utility, and as such carries considerable clout among lawmakers. Even so, H.B. 475 passed the House on March 20 by an 80 to 20 vote and H.B. 193 passed on Feb. 1 in a 68 to 32 vote.

NorthWestern Corporate Counsel John Alke said during the hearing that NorthWestern files general rate cases infrequently because customers do not like rate increases. "We have customer relations issues," Alke said. "We want to minimize the amount of general rate filings we make." The move by the PSC to get the legislature to abolish trackers led Moody's to downgrade NorthWestern's investment rating in mid-March, Alke said.

"It would be irresponsible at this time to repeal the Montana law that has set in place the financial mechanism ... for the recovery of costs until the next general rate case filing is made," Alke said.