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NorthWestern Energy customers would see a $6.5 million rate increase under a proposed settlement between the utility and some opponents to its billing plans.

The $6.5 million rate increase is down from the $34.8 million originally sought by the South Dakota-based utility. Several parties who objected to the original proposal have agreed to the new amount, including Walmart; the Montana Consumer Counsel; Federal Executive Agencies; and a Montana group of large energy customers, such as Exxon, REC Silicon and Stillwater Mining Company.

The settlement agreement also preserves a 10% return on equity for NorthWestern's 30% ownership share of Colstrip Power Plant. 

Additionally, NorthWestern has a second settlement with Walmart and the state Department of Environmental quality to modify its E+ Green tariff, in which customers can invest in renewable energy by paying extra.

Groups who aren't part of either settlement include the Northern Cheyenne Tribe, Northwest Energy Coalition, Natural Resources Defense Council, Vote Solar, the Montana Environmental Information Center and a Billings couple, Leo and Jeanne Barsanti. The Barsantis say that they and other Montanans have been over-billed for streetlights by tens of thousands of dollars.

The settlements would have to be approved by the Montana Public Service Commission, which during a hearing Monday in Helena didn't know what to make of NorthWestern's steep price drop.

The utility has for months presented experts arguing that it needed to raise rates $34.8 million, or $76.44 per residential customer per year.

"I'm confused as to how we should, or myself, look at testimony as being expert testimony that is not a hill to die on," said Tony O'Donnell, commissioner from Billings.  

In February, the PSC agreed NorthWestern rates could increase $10 million in the interim while the remaining $24.8 million was being considered. The utility argued the interim increase was essential.

That $10 million rate hike already approved would be walked back as part of the $6.5 million settlement.

Brian Bird, NorthWestern's chief financial officer, told O'Donnell to trust the parties that agreed to the settlement.

"If those parties are going to attest to you that this increase is fair to our customers, they represent them too. I think that's very powerful," Bird said.

Bird took the argument a step further, saying that the $6.5 million settlement, which will increase customer bills from where they were before rate proceedings started, was actually a rate decrease because the $10 million the PSC approved in February was coming off the books and more than the settlement amount.

At least one Public Service Commissioner, Republican Randy Pinocci, agreed with Bird's math.

"By approving this stipulation, I will be approving a lower rate for customers," said Pinocci, who represents customers north and east from Great Falls to Sidney. Bird assured Pinocci the commissioner had it right based on the difference in the size of the $10 million rate increase and the stipulated settlement.

Commissioner Roger Koopman, of Bozeman, wasn't buying NorthWestern's logic.

"To be perfectly clear, this stipulation does not reduce customer rates over the existing tariff," Koopman said. "It reduces obviously the rates over the interim that we've got. And the interim is just that. It's an interim, sort of a temporary condition that we agree to, and I think we made a good decision. But actually it does represent approximately a 2% increase in residential rates if we adopt this stipulation."

Bird responded by saying the rate increase was closer to 1% and a good outcome for customers.

Renewables

The second settlement agreement was brought about by dissatisfaction with the E+ Green program, which allows NorthWestern customers to "green up" by paying extra to add renewable energy to their bills. The program, approved by the PSC in 2002, hasn't had many takers. DEQ pointed out that only an average 289 residential customers and 16 commercial customers participated in the program from 2013 through 2017.

Since the program's approval, third-party renewable energy prices have fallen and are now cheaper for customers than coal or hydropower owned and generated by the utility. 

DEQ and Walmart want green tariffs that work. NorthWestern agreed to review its E+ program and consider options.

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Colstrip

What's not being settled out of the case are customer costs associated with NorthWestern's share of Colstrip Power Plant, or new charges for customers who net meter.

MEIC and Sierra Club argue that customers are paying too much for NorthWestern's 30% share of Colstrip Unit 4. Ratepayers are on a $407 million payment plan at 8.25% interest though 2042 for NorthWestern's Colstrip share.

The $407 million price has been controversial since it was set in 2008, one year after NorthWestern secured its ownership in Colstrip for $187 million.

Assessments of the power plant's value, including NorthWestern's, have come in lower than $407 million, some much lower. Economist David Schlissel, an expert witness for MEIC, estimates that NorthWestern's share of Unit 4 is worth $100 million and that customers' burden should be lowered to reflect that.

NorthWestern is asking that $42.6 million in Colstrip expenses be included in its rate base. MEIC is asking the PSC not to add those costs to the base.

The net-metering demand charge stems from what NorthWestern says are costs associated with customers with solar panels who at times sell electricity back to the utility. The company says it's paying those customers three times too much for net metered power. The utility wants to charge a higher rate to those customers during their biggest hour of consumption.

Vote Solar argues that the utility's proposed rate will kill residential solar.

NorthWestern has notified existing net-metered customers they would be exempt from the higher charge, which would only apply to new net metered customers.

Additionally, the Northern Cheyenne Tribe has asked that NorthWestern include the Northern Cheyenne in any financial program to help the Colstrip community transition to an economy without Colstrip Power Plant. The are 100 Northern Cheyenne members who work in Colstrip, which is a short drive from Lame Deer.

William Walksalong said the tribe has been shut out of transition talks as other utilities with Colstrip ownership offered transition funds. Walksalong has suggested NorthWestern put up $4.5 million and include the Northern Cheyenne in the transition.

John Hines, NorthWestern's vice president of supply and government affairs, has testified that Walksalong's concerns are premature and focus on the wrong party. NorthWestern wants to keep Colstrip running, Hines testified earlier, suggesting that the tribe should ask the Sierra Club for money.

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