Montana Consumer Counsel, NorthWestern Energy, advocating on same side before PSC

By: - April 17, 2023 5:54 pm

High voltage towers (Photo by Getty Images).

Sen. Brad Molnar pitched a bill this session that, in his words, got “clobbered.”

The Laurel Republican standing alone isn’t unusual — but he did find one thing curious.

The bill said if NorthWestern Energy shuts down Colstrip, it can’t pass the costs of a plant that isn’t working on to customers. Today, he said, that cost would amount to $365 million.

In committee, legislators voted 11-1 to table Senate Bill 387, but Molnar said one group was noticeably absent.

“There has to be protection for consumers. I was trying to do that with the bill. And yet the Consumer Counsel never showed up,” Molnar said.

The Montana Consumer Counsel is established in the state constitution to advocate on behalf of customers. It does so before the Public Service Commission — which regulates monopoly utilities — and in other “select matters.”

Last week, the Public Service Commission started a hearing on a significant rate hike NorthWestern Energy proposed, one numerous people have characterized as historic and unprecedented.

NorthWestern wants the PSC to approve a negotiated settlement that would amount to a 28% increase on residential electric bills compared to August 2022. Some businesses also would see increases during the same period.

In the case, the Montana Consumer Counsel, a small state agency with a duty to consumers, is advocating on the same side of the settlement as the energy behemoth, a $3.5 billion power company with a fiduciary responsibility to shareholders.

The hearing continues this week.

One former member of the Public Service Commission said he sees wins the Montana Consumer Counsel can point to for consumers in the settlement both it and NorthWestern support.

For example, Travis Kavulla said in its original application, NorthWestern Energy had asked for some “single-issue charges” that reduce regulatory oversight and shift risk to consumers.

In the settlement, however, Kavulla, a former commissioner, said the Consumer Counsel won in “cutting off any number of blank checks on future spending” NorthWestern had requested.

“I think the Consumer Counsel is doing a good job in an environment with a high degree of uncertainty and a lot of very big numbers,” said Kavulla, a Republican, in written comments.

Molnar also said it’s customary for the power company and consumer advocate to “reach an accord” after the utility starts its negotiations high and then comes down.

However, Kavulla and others with experience in the issues that come before the regulatory body said settlements by their nature divert members of the Public Service Commission, all elected, from a full evaluation of all the factors in a rate case.

And some observers, including another former commissioner, wonder if moves by the Republican supermajority in the legislature have influenced advocacy by the Montana Consumer Counsel before the PSC and at the Capitol.

The Montana Consumer Counsel’s Jason Brown could not be reached for comment for this story via email sent to him and his office on Friday or a follow up voicemail for staff; the PSC hearings have been running a full workday, and it appears possible they will run through Wednesday.

However, before the legislature started, Sen. Steve Fitzpatrick, R-Great Falls, proposed a rule to limit the authority of the Consumer Counsel to testify before the legislature on the way bills would affect consumers.

After some outcry, Fitzpatrick reversed course.

Nonetheless, Molnar said subsequently, he saw some issues that were “pretty germane to consumers” before the energy committee, but he never saw the Consumer Counsel.

“I don’t think it takes a genius to figure out that maybe they didn’t think it was worth riling up the feathers of those who voted to keep them silent,” Molnar said.

Ken Toole, a former legislator and previous Public Service Commissioner, said even though Fitzpatrick’s rule didn’t end up on the books, the maneuvering sends a signal.

Toole, a Democrat, said the Consumer Counsel hasn’t been a radical advocate for consumers compared to some other organizations, and in general, it historically has leaned “a step or two” toward NorthWestern’s position.

In the current case before the PSC, though, he wonders if the proposed rule may have helped shape the way the Consumer Counsel negotiated.

“I am concerned that the attack at the beginning of the session on the Consumer Counsel is part of the reason that the politics of this thing are all screwed up,” Toole said.

One provision of the settlement is particularly odd, according to Kavulla: “The settling parties have agreed not to cross-examine each other, and all of them are obligated by the settlement’s terms not to speak critically of any part of it.”

In one exchange during questioning last week, one lawyer pointed out the Montana Consumer Counsel was blocking information from coming to light.

During the exchange, the Consumer Counsel’s Brown objected when lawyer Monica Tranel requested information from a witness.

Tranel asked energy consultant David Dismukes, testifying for the Montana Consumer Counsel, if the Consumer Counsel had advocated for “any solutions that would have required (NorthWestern Energy’s) management to bear some of the financial consequences for failure to plan.”

The Consumer Counsel’s Brown objected. He argued any discussions in that vein would be protected as a confidential part of the settlement.

Tranel, representing 350 Montana, said she wasn’t asking for details. Rather, she said she wanted to know generally, whether “the Consumer Counsel did its job in advocating for the consumers of Montana and ensuring that the utility bears some of the financial consequences of poor planning.”

Commission Chairperson James Brown sustained the objection, and Tranel underscored the outcome.

“I trust the record will appropriately reflect the Consumer Counsel’s desire to truncate the amount of evidence that’s coming before the commission in this proceeding,” said Tranel, who previously worked for the Consumer Counsel.

Generally, Toole said he never understood the way the PSC handles settlements because a settlement doesn’t engage all the parties in a case. In this case, at least 12 different groups are participating, but just five have signed onto the negotiation.

Now that a settlement is in play, however, Toole said the argument shifts from the discovery of facts to whether the settlement is a good deal.

The settlement allows the Public Service Commission to efficiently move on a case, but some information the commission should know stays buried, a lot of facts never get discussed, and rigorous cross examination doesn’t take place, Toole said.

“You have to wonder how much of this is getting swept under the rug because Jenny Harbine doesn’t get to ask all of her questions and Monica Tranel doesn’t get to ask all of her questions,” Toole said.

Harbine represents the Montana Environmental Information Center in the case, and Tranel represents 350 Montana. Neither of those parties have signed onto the settlement.

In the months ahead, the Consumer Counsel will be under more partisan oversight.

This year, Republicans hold a supermajority in the legislature, and they passed a bill that changes the composition of the Legislative Consumer Committee, which oversees the Montana Consumer Counsel.

In the past, the committee was composed of one Democrat and one Republican from the House, and one of each from the Senate.

This year, though, the legislature passed Senate Bill 176, and it changed the makeup of that committee, among others. According to the legislative tracking site, the bill is awaiting a signature from Gov. Greg Gianforte, also a Republican.

Instead of bipartisan oversight, the committee will be made up of three members from each chamber, two from the majority, and one from the minority, or currently, four Republicans and two Democrats.

As Molnar sees it, the party that voted to silence the Consumer Counsel now has a majority on the committee overseeing the agency.

“That committee can also fire Jason Brown,” he said.

Molnar said legislators aren’t NorthWestern’s board of investors, and they’re supposed to represent the people who elected them, not the energy company. But he said scrutiny isn’t easy.

“There’s a definite desire to make sure the light of transparency isn’t shining on any of this,” Molnar said.

Settlement concerns

As a signer to the settlement, the Montana Consumer Counsel can’t question NorthWestern’s witnesses, according to the proposed agreement.

However, the proposed settlement means Public Service Commissioners can’t fully evaluate the case either, according to former commissioners.

“From a distance, it seems like a somewhat reasonable settlement, but it is still a huge rate increase, one that probably should be phased in and come with a more substantial reduction in the utility’s authorized return for shareholder investment (which the settlement puts at 9.65%),” said Travis Kavulla, a Republican and former Public Service Commissioner.

“MCC is probably guessing this is a better outcome than the Commission itself would have approved, which is why it settled.

“NWE meanwhile is probably settling because it prefers less uncertainty for its shareholders, and because it can fight all the battles it lost another day.

“I will say that I was always skeptical of approving settlements in big cases, because I felt as a commissioner I ought to be making those decisions myself—that’s why people elected me, right?

“However, I understand all parties’ desire to limit the uncertainty they are dealing with if the Commission were left to rule in potentially unpredictable ways on each of dozens of issues.”

In this case, former Public Service Commissioner Ken Toole said it’s “outrageous” that residential customers will get a significant increase compared to some business customers — an 18.2% increase compared to current rates for residential customers, but 0% for some businesses in the same period.

“It seems unusual to me that there’ such a heavy blow to the small customers,” said Toole, a Democrat.

He said Walmart and the commercial class sit at the table in a negotiation with their own narrow interest, and typically, the people left out are regular consumers. Those are the people he believes the Montana Consumer Counsel should be representing, the people who don’t have the resources to do their own advocacy.

“The big dog that is on the consumer side is the Consumer Counsel,” Toole said.

Kavulla, though, said he does see positives in the settlement for consumers. He said it gives NorthWestern most of the money that it asked for, but it also rejects a number of the “single issue charges,” the “blank checks.”

“This means the cost of building the Laurel plant won’t automatically go into rates, which is a big deal,” Kavulla said.

At the hearing, lawyers are asking many questions about the portion of the settlement related to the Laurel plant and what the specific language and figures might mean for consumers.

Kavulla said the settlement also preserves the structure of a cost tracker for fuel and purchased power, “which requires cost-sharing on the part of NWE shareholders when they underperform a certain baseline.”

He said it would be poor form for non-settling parties to learn of an agreement at the last minute, as appears to have happened in this case, and also not good form that impacts to consumers weren’t available until days into the hearing.

“If I were a commissioner, that type of thing would probably be reason enough for me to simply look at the settlement as a piece of advice, and instead proceed to make rulings on each of the issues myself,” Kavulla said.

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Keila Szpaller
Keila Szpaller

Keila Szpaller is deputy editor of the Daily Montanan and covers education. Before joining States Newsroom Montana, she served as city editor of the Missoulian, the largest news outlet in western Montana.