PPL Dam purchase
4:03 pm
Wed September 3, 2014

PSC To Vote On Northwestern Energy Dam Purchase Proposal

The chairman of the agency that regulates Montana's public utilities says he supports Northwestern Energy's $870-million-dollar proposal to purchase 11 hydroelectric dams from PPL Montana.

Rainbow dam
Rainbow dam
Credit Dan Boyce

The PSC board is scheduled to cast a vote on the purchase tomorrow.

Public Service Commission Chairman Bill Gallagher says there's … risk... associated with an acquisition of this size, but adds the potential benefits are substantial.  

Gallagher says not only would the purchase stabilize rates but bring diversity to power production in Montana:

"Diversity in geography. That is, the dams are spread out across Montana. There's diversity in watersheds; and it is a nice addition of fuel diversification to the existing Northwestern portfolio."

Gallagher adds the dams are a more predictable source of energy than some other renewable sources:

". . . in that the hydrologic cycle happens every year - sometimes more, sometimes less - but there's nothing more renewable than the hydrologic cycle. It is predictable when it comes to keeping just the exact right amount of electricity on the system as is required. Some of our renewables are very unpredictable and a lot of effort goes into predicting when the wind will blow and when it will not. With water flows, there's a big advantage of knowing both from the snow-pack months in advance to what the flows are upstream to know what kind of generation is going to occur. "

But Montana Consumer Counsel Bob Nelson warns consumers could notice high initial costs.

"Market prices right now are very low and they're in the upper 30s - maybe $40-dollars a megawatt hour range. If this purchase is approved it would come at a price of about $60-dollars a megawatt hour, which would displace the $40-dollar a megawatt hour market purchase. So we calculated that it would result in an immediate difference of close to $60-million-dollars-a-year."

Nelson adds there are several variables that could also affect Northwestern's customers, including unexpected operations and maintenance expenses and unpredictable carbon regulation costs. 

He says the Consumer Counsel's office has made recommendations that it says could help protect consumers:

"Those relate to payments with respect to the carbon regulation assumptions the company has made and who should pay for those up front as opposed to in the future. We proposed protections related to the capitol expenditure assumptions the company made as part of the formation of the bid and the price they're proposing to pay. So, all along we've proposed some of those kinds of protections."

The Montana Public Service Commission is expected to vote on Northwestern's dam buy-back proposal tomorrow in Helena.