Montana Public Radio

PSC Issues Fine Over Mountain Water Sale, Declines Request To Revisit Renewable Rate Change

Jul 7, 2016

The private company that owns Missoula’s city water system got slapped with a financial penalty today.

Our Capitol reporter has details on that, as well as efforts to change how much renewable energy companies can charge customers. Reporter Corin Cates-Carney followed the action and joins us now to fill us in.

Eric Whitney: Hi Corin.

Corin Cates-Carney: Hi Eric.

EW: The Public Service Commission of course regulates utilities in Montana, and they issued a fine against the private company that runs the city of Missoula's water system, right?

CCC: Yes, a $150,000 fine.

EW: And that's related to the sale of that company, called Mountain Water, back in January, right?

CCC: Yes, that sale happened without the PSC's approval, which the PSC says shouldn't have happened. At the time, the PSC said this was unprecedented, because a utility company needs to notify the PSC if they’re going to sell the shares of their company.

So the commissioners voted to settle that case by fining the parent company, Liberty Utilities, $150,000. That money will go to the Missoula Human Resource Council.

EW: And the commissioner also ruled that Liberty was trying to pass on to consumers some costs from the financing of the sale?

CCC: Bob Lake, a commissioner from Hamilton, said that the change in owners of Mountain Water also changed the operating costs, which means Missoula consumers will see cheaper water over the next year.
"The determination by our staff's analysis was that there was about $1,111,000 of potential reduction of rates because of that lower cost of capital," Lake said.

EW: Another vote by the Commission was a request from a solar energy company, and this has to do with how much utility companies, specifically NorthWestern Energy, how much NorthWestern has to pay for solar energy and other renewable energy right?

CCC: Yes, that's right, the FLS Energy Inc., a company from North Carolina, wanted to build utility-scale solar developments in Montana. They were far enough along in the process that they said they felt they should be able to keep working under the old rates. And so late last week, they filed an application with the Montana PSC for a re-hearing so that they could keep working under the existing rates, which are $66 per megawatt hour, instead of having to wait, and maybe work under a cost where they wouldn't make as much money, as is expected when the PSC adjusts that rate later this year.

And so the PSC created two tests for companies who wanted to stay within existing rates. FLS contends that they met one of them, and they didn't meet the second, but they should have, but because of NorthWestern's actions, they weren't able to.

Commissioner Travis Kavulla says that some of those concerns that FLS has are legitimate.

"The fact that the interconnection agreement rule isn't being followed by NorthWestern isn't on us, and it is not on FLS. It is squarely on NorthWestern and it seems that they have opened themselves up to really significant problems and unintended consequences from the way they have conducted themselves."

EW: How did NorthWestern Energy respond to the vote?

CCC: John Alke, a lawyer with NorthWestern, said that while there is a five-day deadline, it can be stretched if the company is making a reasonable effort. Which he says his company is because of the complexity of the situation. FLS has 14 projects that they're trying to negotiate with NorthWestern.

"The suggestion that NorthWestern violated its obligations under the small generation interconnection protocols, that's fundamentally untrue. That did not happen," Alke said.

The commission said they would not give FLS a rehearing. But FLS can still challenge the PSC order that will come out next week, defining the terms of the solar rate suspension. There is also the possibly that they could challenge NorthWestern.

EW: And the commissioners also spent a couple of hours with NorthWestern talking about a separate issue, pipeline safety?

CCC: Yes, they talked about their finances and important issues for the company and for rate payers. One topic the company stressed as a significant issue was the proposed changes to the federal pipeline regulations.

In March of this year, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration, also known as PHMSA, set proposed regulations to update pipelines that would have to carry natural gas. This would mean adding new pipelines, repairing old ones. and making sure pipelines are in safe locations.

Mike Cashell, VP for Transmission at NorthWestern, says the company has some pretty big concern about what PHMSA is suggesting.

"The estimation of the impact has been severely underestimated by PHMSA and AGA supports that comment. Our comments really touch that point. This could be a incredible amount of investment required on our system."

Cashell mentioned the AGA, that the American Gas Association. NorthWestern has a team working with the AGA commenting process on the proposed rulings.

EW: Is NorthWestern saying that the new rules will cost them a lot of money, and that they'll have to pass those costs on to customers?

CCC: Yes. So they released a report today which said they might have to update about 400 miles of their pipeline. And NorthWestern is projecting that complying with that PHMSA ruling could require over $200 million in capital, with the proposed customer rate increased up to 10 percent.

EW: Corin Cates-Carney, thanks for the update.