Montanaregulators are clashing with the developer of a proposed wind farm over a rate setby the Montana Public Service Commission that the developer says is too low to allowthe project to proceed, while several commissioners are arguing that the decisionwas forced on them by federal law governing renewable energy contracts.

On July19, the PSC approved a rate of $45.49 per MWh for an up-to-25-year contract betweenthe 26-MW Greycliff Wind Energyfacility and NorthWestern Corp.subsidiary NorthWestern Energy, less than the $53.39 per MWh requested by wind developerGreycliff Wind Prime LLC but more than the $35.65 per MWh proposed by NorthWestern.

The rateis not feasible and a "real setback" for the Greycliff Wind project, accordingto Rhyno Stinchfield, the CEO of MontanaWind Resources, one of the owners of the project."Frankly, we're not sure how we can proceedat this point since the legal costs of contesting Northwestern Energy are huge,"Stinchfield said in an email.

But someof the commissioners said they would have preferred the rate be even lower. Theproblem, they said, is that the PSC is hamstrung by the federal Public Utility RegulatoryPolicies Act, or PURPA, which requires utilities to buypower from certain qualifying facilities, including small wind, hydro and solarpower facilities. To some degree, PURPA locks in a price for these renewable contractsby requiring the qualifying facilities to be paid at the utility's avoided cost.The rate approved for Greycliff Wind was based upon NorthWestern's avoided cost,according to a statementthe PSC released explaining the order.

"Unfortunately,in every [qualifying facility] docket, the Commission is faced with trying to makesense out of federal policies that make no sense," Commissioner Roger Koopmansaid. "The best the Commission can do with unworkable law is try to strikea fair balance with the best information we currently have available, thereby providingas much consistency and predictability as possible to the renewable energy marketplace."

"I am not at all satisfied with the high price that wasapproved, but the law requires the Commission to mediate the negotiations of thiscontract, and resolve any disputes between the parties," Commissioner Bob Lakesaid. "Federal law limited the amount of discretion the Commission could usein setting the price consumers pay for this wind power, and we had very little authorityto include additional benefits for consumers that we felt were necessary."

"Federal law (PURPA) is requiring us to buy electricitythat does little to meet the needs of our customers. In recent years, we have developeda balanced portfolio that includes large and small-scale hydro, wind, coal and naturalgas as generating sources," NorthWestern spokesman Butch Larcombe said. "Weexpect to see solar become part of the portfolio in the near future."

Out of a power plant portfolio of 1,279.3 MW of operating capacity,NorthWestern currently owns 119.6 MW of renewables in the form of wind capacity,according to S&P Global Market Intelligence data.

NorthWestern does need more peaking generation, but neither windnor solar provides the reliability or "flip-the-switch" availability theutility is seeking, according to Larcombe. Rather than Greycliff Wind, NorthWesternwants to build a natural gas-fired plant that the utility believes would be a muchcheaper and more efficient way to meet peak demand.

Accordingto S&P Global Market Intelligence data, the owners of the Greycliff Wind facilityare Montana Wind Resources, NationalRenewable Solutions LLC and Hangman'sCreek LLC.