Judge grants preliminary injunction in lawsuit against NorthWestern Energy

U.S. District Judge Susan Watters granted this week a preliminary injunction on enforcement of a bill that aimed to help the coal-fired Colstrip power plant stay open — but legislation that the plaintiffs argue is unconstitutional.

In the complaint, four of the Colstrip owners from Oregon and Washington alleged Senate Bill 266 impaired their contract rights. Among other allegations, the Pacific Northwest Owners argued the bill subjected them to unfair $100,000 per day fines based on violations of “vaguely worded” provisions of Montana’s Consumer Protection Act.

Watters ruled the evidence supports an injunction for the time being. For one thing, the judge said any law that confers a benefit on a local producer or harms an out-of-state producer violates the Commerce Clause, and the plaintiffs showed the bill was clearly meant to protect the coal fired units in Colstrip.

“The PNW Owners (plaintiffs) have presented evidence, uncontroverted by the state and other defendants, that the purpose of SB 266 is to protect Colstrip Units 3 and 4 from ‘out-of-state corporations’ and ‘woke, overzealous regulators in Washington state,’ as evidenced by the Governor’s signing statement and transcript of SB266’s hearings,” the judge wrote. “This supports a finding of discriminatory intent in passing SB 266.”

In their amended complaint, the plaintiffs outlined the clash taking place among Colstrip’s owners. Portland General Electric, Avista, Pacificorp, and Puget Sound Energy sued the other owners, NorthWestern, and Talen Montana, in addition to defendant Attorney General Austin Knudsen, whose job it would be to enforce the fines.

“The Pacific Northwest Owners face governmental mandates to eliminate the use of coal-fired electricity in states where they serve customers, which become effective as soon as 2025,” said the amended complaint. “Their decisions on the future of Colstrip — and whether or when to close the coal-fired units — must take these restrictions into account. Talen and NorthWestern are not subject to the restrictions, and they currently want to keep Colstrip running far into the future. This disagreement has predictably led to contract disputes.”

In a news release, Puget Sound Energy said the decision this week means Colstrip owners can plan for the future of the facility and “unavoidable environmental and economic realities.”

“The legislative action and stakeholder support associated with SB 266 was a disheartening development in the face of PSE’s effort to explore constructive solutions,” said PSE General Counsel Steve Secrist in a statement. “PSE has consistently worked for constructive solutions regarding Colstrip, including the exploration of transactions and even financial contributions for the Colstrip community. Today’s ruling affirms PSE’s approach and intent.”

With Oregon and Washington steering away from coal, the Pacific Northwest Owners are wanting to take steps toward phasing out of Colstrip. The judge’s order notes those owners want to take steps toward closure, such as budget reductions, but the threat of punishment in the bill is holding them back.

One of the key issues is who gets to decide if the Colstrip units close. The plaintiffs, which own 70 percent of Units 3 and 4, argue SB 266 gets in the way of their contractual rights to close one or both units with less-than unanimous consent. The Ownership and Operation Agreement the parties signed in 1981 said voting shares are allocated by ownership share, with Talen and Northwestern sharing a 30 percent voting segment, and most actions requiring 55 percent of votes to proceed, according to the order.

In her order, the judge said the question of the number of votes needed to shutter the project under the agreement is pending in arbitration.

In a statement, NorthWestern said the question about whether a unanimous vote by owners is required to close the plant is the only one the utility has been looking to resolve.

“NorthWestern Energy is disappointed that some Colstrip Power Plant owners have chosen to file multiple lawsuits in multiple jurisdictions instead of negotiating the differences between the owners or agreeing to arbitrate the critical issue regarding closure requirements,” NorthWestern’s Jo Dee Black said in a statement.