Montana Public Service Commission Gives Final Approval to $900 Million Dam Sale
The Montana Public Service Commission has wrapped up its approval of the $900 million purchase of 11 hydroelectric dams by NorthWestern Energy. Public Service Commissioner Travis Kavulla explained the process:
"The PSC voted Thursday to issue a final order. It basically clears the way for Northwestern Energy to complete its transaction with PPL," Kavulla said. "It's still subject to a final federal regulatory approval, but I would expect the transaction to be formally completed on the business side by the end of the calendar year."
Anyone who buys energy from Northwestern Energy will be paying for this transaction. Kavulla said rates are expected to jump by five to six percent at first. He has bigger fears for the future.
"The real concern is how these hydroelectric facilities will perform relative to options NorthWestern could've selected to supply customers over a longer scope of time," Kavulla said. "PPL and Northwestern Energy work under two fundamentally different business models. PPL's revenues were dependent on the value of the product they're selling into the market. In other words, the market defines what they get paid for hydroelectric generation. NorthWestern Energy, in agreement to purchase these hydroelectric facilities for $900 million, is basically taking every penny of that sum of money and putting it into rates—ensuring that whatever they've paid for that factory, in other words, is going to be recovered from consumers regardless of the value of the product that factory produces."
Kavulla said the risk shifting involved in this deal is not good public policy.
"It basically takes all of the risk of a business decision, alienates it from the business making that business decision, and puts it on a captive base of consumers which is just not something I could support," Kavulla said. "The horse has left the barn and I'm simply left to hope that I'm wrong on some things because one way or another, ratepayers will be paying for this for decades to come."
Kavulla was the only one of five public service commissioners that voted not to approve the purchase.