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Mont. PSC denies NorthWestern recovery of costs related to Colstrip plant outage

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Mont. PSC denies NorthWestern recovery of costs related to Colstrip plant outage

Montanaregulators voted 3-2 to disallow recovery of electricity supply costsNorthWestern Corp.said it incurred due to a July 2013 outage at the coal-fired plant when its unit 4broke down and was out of service for more than six months.

Theplant has been the subject of numerous attacks by environmentalists and cleanenergy advocates.

TheMontana Environmental Information Center pointedto the PSC's decision as further proof of how the plant is expensive andunreliable, in addition to being Montana's biggest air polluter.

have been raisedconcerning the continued operation of the 2,094-MW, four-unit plant.Washington and Oregon legislators recently passed bills raisingdoubts about the plant's future. The U.S. EPA's Clean Power Plan for limitingcarbon dioxide emissions has added to the uncertainty. , whichowns 50% of Colstrip units 1 and 2, is consideringwhen those units, the plant's oldest, should be retired.

Now,in Colstrip's home state, a thin majority on the Public Service Commission onMarch 29 criticized NorthWestern's past operations at the plant. CommissionerKirk Bushman noted this, saying the PSC's decision adds uncertainty forcoal-fired generation in Montana.

"Icould not support the motion today as it is potentially another nail inColstrip's coffin, and it's the ratepayers of Montana who will eventually paythe price if Colstrip closes," Bushman said in a commission .

Afinal order from the PSC won't be issued until mid-May, but in its newsrelease, the commission said it decided to disallow recovery of $8.2 million inreplacement power costs. NorthWestern said it was also denied recovery of $1.5million in portfolio modeling costs. The commission in June 2014 identifiedabout $11 million in market purchases related to the 2013 Colstrip outage thatit put under a prudency review.

CommissionChairman Brad Johnson and Commissioners Travis Kavulla and Roger Koopman votedto disallow recovery of the $9.7 million in costs. Bushman and Commissioner BobLake dissented.

NorthWestern, whichdoes business in Montana as NorthWestern Energy, the decision will result in a $9.7million pretax charge to earnings in 2016. In a , the company's vicepresident and general counsel, Heather Grahame, said NorthWestern isconsidering legal options.

"Itis particularly disappointing that Montana is disallowing these outage relatedcosts when no other state utility commission has found the utility wasimprudent as it relates to the 2013 Colstrip Unit 4 outage," Grahame saidin the company release.

Shepointed to the separate conclusions of the Idaho Public Utilities Commissionand Washington Utilities and Transportation Commission that there was noevidence of imprudence. NorthWestern owns 30% of Colstrip unit 4 and five othercompanies have ownership interests in the plant. operates the plant.

Commission majority faultsNorthWestern decisions

Montanalaw allows recovery of all prudently incurred costs for plant operations,including replacement power costs when a facility is offline, NorthWestern said.

However,three commissioners said NorthWestern should not put the costs on ratepayers.They agreed with intervening parties to the proceeding, namely the MontanaConsumer Counsel, the Montana Environmental Information Center, the Sierra Cluband Earthjustice, that NorthWestern should have taken steps to get outageinsurance to protect ratepayers from such an event and should have explored thepossibility of requiring generator manufacturer to pay forthe electricity market purchases because equipment malfunctioned immediatelyfollowing a routine maintenance on the unit by Siemens.

"Therewas no evidence presented in this proceeding that proves to me that ratepayersshould have to pick up the tab for the outage of this plant," Johnson saidin the commission's news release. "There were numerous steps thatNorthWestern could and should have taken to protect their customers in theevent of an outage, and unfortunately they failed to do so."

Koopmanagreed, saying, "I do not support the attitude that ratepayers should coverthe costs of a utility's bad decisions, and the commission made the correctdetermination today within the law that guides us."

Kavullasaid NorthWestern should have bought insurance to cover power replacementcosts. Lake, however, said in dissent NorthWestern had property insurance and areciprocating agreement with Colstrip unit 3.

NorthWesternCEO Bob Rowe, formerly a chairman of the Montana PSC, said the company hasdiversified through acquisitions of hydroelectric resources, but that Colstripis by-and-large a dependable baseload plant.

"We'veassembled a diverse hydro-based generation portfolio in Montana that is nearly70% carbon-free by nameplate [capacity]," he said in the company's newsrelease. "Our 30% ownership in Colstrip Unit 4 is a critical part of thatportfolio, with an availability factor of 94%."

The740-MW unit 4 shut downon July 1, 2013, due to a ground faultin the stator rotor of the electric generator and maintenance crews founddamaged core iron in the stator. The outage lasted until Jan. 23, 2014.