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NorthWestern, Mont. regulators dispute QF developer lawsuit allegations

NorthWestern Corp. and Montana utility regulators disputed the allegations by a wind farm developer in a lawsuit claiming the Public Service Commission's new standard rates and contract terms for qualified facilities were discriminatory and designed to limit small wind projects in the state.

Wind development company WINData LLC and its CEO, Martin Wilde, filed a complaint Oct. 10 in the Montana Eighth Judicial District Court, Cascade County, a state court located in Great Falls, Mont., naming NorthWestern and the PSC, alleging NorthWestern colluded with the PSC to limit qualified facilities, or QF, contracts.

"The claims in this complaint are patently false," PSC spokesman Chris Puyear said in an interview Oct. 18. "This commission has done more than any ... to create a level playing field upon which independent power developers and the utility can compete for the opportunity to serve customers."

Puyear said NorthWestern has been very unhappy with the commission's rulings and petitioned for reconsideration of the commission's June 22 decision setting standard rates and contract lengths. Further, he added, NorthWestern heavily lobbied the Montana Legislature in an effort to undo commission actions, so the allegation that the PSC somehow colluded with NorthWestern to set the standard rate for QF projects is untrue.

That was also the assessment of NorthWestern Vice President of Supply John Hines.

"The allegations in this complaint are totally without merit," Hines said by email. "QF rates, like market prices and the valuation of customer-dedicated generation, all change over time, consistent with market-based alternatives and the needs of the electricity portfolio. To infer that all rates should be the same over many years is without merit and shows a complete misunderstanding of how avoided costs (QF rates) are set."

NorthWestern and the Montana Consumer Counsel focused on developing rates that would not harm more than 360,000 NorthWestern electric customers in Montana, Hines said, adding that the PSC must set QF rates consistent with the federal Public Utility Regulatory Policies Act that do not create huge financial profits for what have been typically out-of-state developers, to the detriment of utility customers. The PSC is required to set rates so that customers are financially indifferent to whether they are getting power from the utility or Public Utility Regulatory Policies Act projects, he said.

Nevertheless, Wilde and WINData assert that the rates the commission set for independent wind and solar developers — for wind, $26.06 per MWh off-peak and $33.77 per MWh on-peak — are roughly one-third the rates set for the utility's own generating assets. The PSC also cut the contract lengths for independent developers. Puyear said the suit unreasonably compares an average price for all NorthWestern's resources, including contracts in which prices were negotiated many years ago, to forecast prices for future development upon which the standard QF contract prices are set. Wind and solar projects have dramatically decreased in price over the years, he noted.

The suit acknowledges the commission on Oct. 5 changed an earlier decision to reduce contract lengths by instead establishing a 15-year standard term. However, the suit quotes a "hot mic" exchange between an unidentified PSC staffer and Commissioner Robert Lake, who voted against the change. The staffer said a five-year rate will "probably kill QF development entirely," while Lake replied, "Well, actually the 10-year might do it if the price doesn't ... So it's probably a totally moot point because just dropping the rate that much probably took care of the whole thing."

The suit states NorthWestern has an economic disincentive to purchase energy from independent suppliers because it gets a guaranteed rate of return of more than 10% for its own generation facilities. The complaint states the commission denied a carbon adder for QFs but valued carbon emissions at $247 million to justify NorthWestern's $826 million purchase of hydroelectric power facilities.

The suit seeks damages of at least $4.8 million plus legal fees and asks the court to order NorthWestern to provide a rate of not less than $45 per MWh to the Golden Flats and WD Wind facilities for 25 years. The two QF projects are both wholly owned by WINData, according to the complaint.

The suit alleges the PSC has engaged in discriminatory pricing methodology for QFs in violation of the Fourteenth Amendment of the U.S. Constitution, which is often used in civil rights cases.

At the same time, the suit asked that the PSC be directed to prioritize inclusion of QFs in NorthWestern's supply portfolio "above all other resources as optimal resources" under state law.