Miles City, other customers, push back against proposed rate hike by MDU

By: - June 26, 2023 4:13 pm

High voltage towers (Photo by Getty Images).

Electricity customers in eastern Montana said this month they’re tired of seeing executives with Montana-Dakota Utilities line their pockets with money they pay for power, and they protested a 19.2% rate increase request on residential payers — and questioned a proposed 9% settlement.

“I consider this the fight of our lives in eastern Montana,” said Mary Catherine Dunphy of Miles City.

In a phone call Friday, Dunphy said the hike will affect seniors, families, farmers and small business owners. Generally, she said it will hurt the economy of communities in eastern Montana. On its website, MDU said it serves electric customers in 30 communities in the state.

The proposal from MDU is the second big energy rate request to recently land on the docket of the Montana Public Service Commission. In April, the PSC held a nearly week-long hearing on a proposal, still pending, from NorthWestern Energy that could cost residential customers nearly 28% more for their electric bills compared to rates in August 2022.

The PSC oversees monopoly utilities with “captive customers,” or ones without realistic power alternatives, and both proposals are receiving pushback.

At a June 15 hearing on the MDU request in Miles City, Bryce Kirk told the PSC low-income people and parents already are struggling, and the utility hasn’t justified the increase by describing investments in infrastructure or business improvements.

“Even 9% is way too much,” said Kirk, with the Fort Peck tribal executive board, at the hearing.

On the other hand, Kirk said MDU Resources’ CEO earned $5 million last year; SEC filings show the CEO earned $5.3 million in 2022, $5.2 million in 2021 and $6.4 million in 2020. Montana-Dakota Utilities is part of MDU Resources.

Plus, opponents argue the company serving 25,600 electric customers in Montana already picked up a nearly 15% increase just three years ago. MDU notes that increase came in two phases, in September 2019 and September 2020.

In that period, though, MDU argues it’s made investments it needs to recoup, and it’s facing inflationary increases as well. Earlier this month, MDU and the Montana Consumer Counsel signed an agreement that would push residential rates up 9% instead of the original 19.2% request — if approved by the PSC.

The PSC is slated to take up the docket again sometime this summer. The original increase would cost residential customers $204 a year, and the increase in the stipulated agreement would cost $96 a year, according to figures from MDU.

But even the lower increase is receiving criticism, and the initial proposal has been eliciting protest all year. In February, Dunphy asked Miles City Mayor John Hollowell to write a letter to the PSC to request it deny the proposed increase, and the mayor agreed, according to meeting minutes.

In the letter, provided to the Daily Montanan by Dunphy, Hollowell said Montanans, especially those on fixed incomes, can’t sustain the original increase MDU wants. Hollowell could not be reached for comment via voicemail Friday.

“Additionally, 14.2% in Miles City live below the poverty level, (and) there is no seeable way they could cover this essential for life,” said the letter sent from Hollowell and council members.

The 9% increase in the stipulated agreement translates to an average $8 more a month for residential customers, or $96 a year, so it would push up a monthly bill from $87.78 to $95.78.

In an explanation on its website about its request, MDU said it has made increased investments since 2018, including in an 88-megawatt simple cycle combustion turbine, and the utility service  has also seen increases in property taxes, labor, software maintenance, and “other recent inflationary increases.”

“We recognize prices have increased for many day-to-day necessities because of inflation increasing in mid-2021 and exceeding 8% in early 2022; however, a good portion of the investments that are part of this regulatory request were made before rising inflation,” said Nicole Kivisto, president and CEO of Montana-Dakota Utilities, in a statement. “We believe the investments are prudent to ensure safe and reliable electric service to our customers. Current prices do not reflect the cost of providing electric service to our Montana customers, which is why we are requesting this increase.”

According to the U.S. Energy Information Administration, extreme temperatures and higher fuel costs drove up residential electricity prices in 2022, which had the largest annual increase since data collection began in 1984.

In a report released at the end of May, the EIA put the increase from $121 in 2021 to $137 in 2022 for the average residential electric customer. That’s a 5% jump after adjusting for inflation, or 13% before adjusting for inflation, the report said.

In the MDU docket, the company argued in its original request that its current rates are “unjust, unreasonable, and not compensatory.” It said the new rates will allow MDU the chance to recover costs and earn a reasonable rate of return “providing service to its Montana electric customers.”

Some customers, though, argue the company is earning a healthy return already, pointing to its own data. The Dawson Resource Council, a local affiliate of the Northern Plains Resource Council, has organized against the increase, and it notes the company took in “record earnings of $103.5 million” in 2021, citing MDU’s own data.

At first, the Montana Consumer Counsel protested the “magnitude” of the proposed increase. However, this month, the MCC and another party that intervened in the case, Denbury Onshore, an oil and gas outfit that describes itself as a “premier carbon solutions company,” signed the stipulated agreement that would increase rates for residential customers 9% if approved; other classes of customers would see increases of 7% to 10.1%, according to the agreement.

In one of several emails to Commissioner Tony O’Donnell, Dunphy said people have expressed “pain and distress” about high utility bills. At one meeting, she heard an elderly man talk about having his lights and heat turned off after he suffered a heart attack and stroke and ran into economic difficulties.

“There were also mothers with babes in arms talking about (how) hard it is getting to balance family budgets,” Dunphy said.

Parents with children spoke out in Miles City too. Dunphy said higher rates would drain millions from eastern Montana communities, and it would hit farmers and producers, who need to keep their barns and shops warm in the winter and power irrigation in the summer.

“This rate increase is an existential threat to eastern Montana’s agricultural way of life where every dollar matters,” Dunphy said in her letter.

In an email to the Daily Montanan, she said the increase would be the second one in three years, and she said the first was 15%.

“I don’t know anyone who is getting those kinds of salary increases,” she said.

Dunphy also said nearly 20% of the residents in Miles City are senior citizens living on fixed incomes. She believes other small towns in eastern Montana share similar demographics.

The PSC granted an interim increase that started Feb. 1, 2023, but the order also said the decision should not be construed as an indication of how the commissioners will ultimately rule. The interim increase was 2.7%, according to MDU.

Dunphy, though, said even that bump, on top of the other one three years ago, is too much.

“The truth of the matter is that the 3% interim rate increase the PSC granted MDU until the final decision is made on this matter has hurt people and businesses,” she said. “The people are being hit in many directions from higher expenses — not just MDU.”

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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.