NorthWestern Energy’s supply plan and Montana’s energy future

This article by Jeff L. Fox originally appeared in the Bozeman (Mont.) Daily Chronicle May 1, and is reprinted with permission of the author.

Every two years, NorthWestern Energy, the electricity supplier for most Bozeman-area residents, submits a Supply Procurement Plan to the Montana Public Service Commission. The plan provides a snapshot of the energy resources the utility currently uses, as well as a 20-year outlook on the utility’s future plans and operating conditions.

If you care about consumer rates, reliable service, and the health of your community and environment, the plan is an important indicator of what you can expect from your electricity provider.

Taken as a whole, the plan should give ratepayers confidence that NorthWestern is on track to fulfill its vision and mission statements of “enriching lives through a safe, sustainable energy future” by “working together to deliver safe, reliable and innovative energy solutions.” Still, as with any plan, there are opportunities for improvements, as well as parts that deserve special praise. Below are a few noteworthy aspects.

NorthWestern should be praised for being on track to meet Montana’s Renewable Energy Standard by ensuring that at least 15 percent of the energy consumed by its customers comes from renewable resources by 2015. Of note, these renewable resources include NorthWestern’s first wholly owned wind project, expected to be in service by the end of the year.

Unfortunately for ratepayers, NorthWestern’s plan fails to consider the additional long-term economic benefits that could be gained by acquiring more than 15 percent of its energy from renewable sources. The omission is glaring because NorthWestern’s own real-world experience, and some of its modeling in the plan, shows that wind energy is among the lowest cost, lowest risk resources available.

For a real-world example, look no further than the Judith Gap wind farm. Since 2005, it has provided clean and affordable electricity for NorthWestern’s customers at costs significantly cheaper than coal-fired electricity from Colstrip. But, instead of doing the analysis to explore how more renewable energy could benefit ratepayers, NorthWestern treats the Renewable Energy Standard in the plan as an artificial cap on the amount of renewable energy it will acquire, instead of a minimum benchmark to build upon.

NorthWestern’s continued focus on energy efficiency is another area that offers opportunity both for praise and concern. Over the last two years, NorthWestern has admirably exceeded the amount of energy it sought to conserve through efficiency, at well below expected costs. Because energy efficiency is by far the cheapest resource available to meet growing demands, NorthWestern’s success in efficiency is a windfall for ratepayers.

But despite NorthWestern’s success at exceeding its targets for cost-effective energy efficiency, the utility’s yearly efficiency targets remain modest. While this recent pattern of under-promising and over-delivering might be viewed as a welcome surprise, it can also be alarming if it means the utility’s efficiency goals are too low, because it is so clearly in the ratepayers’ best interest to ensure that all low-cost efficiency gains are captured before we foot the bill for new, more expensive resources.

Finally, the plan acknowledges that the Colstrip coal plant, one of the largest polluters in the country, poses cost risks to ratepayers when the plant is required to meet environmental standards designed to protect the public from hazardous air pollutants. However, because the time frame and extent of the expected regulations are uncertain, NorthWestern defers on estimating how great the cost risk to ratepayers could be.

Future plans should not only analyze these cost risks, but also compare the expensive upgrades required to meet the standards against making an early transition to cleaner energy sources today. This kind of analysis will help ensure that ratepayers get the cleanest, safest and most affordable energy system possible from future expenditures.

Due in part to NorthWestern’s current lack of owned generating resources, it is uniquely positioned to build a modern energy portfolio that avoids the liabilities of fossil-fuel generation. Through careful planning, NorthWestern Energy can and should make affordable clean energy central to its supply portfolio.
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Jeff L. Fox is the Montana policy manager for Renewable Northwest Project, a non-profit regional advocacy group that promotes the expansion of environmentally responsible renewable energy resources.