At the 2007 Legislature, and subsequent Special Session, MEIC helped to pass HB 25 in the 2007 legislative session.  Among other positive provisions, HB 25 will prohibit the City of Great Falls from luring current NorthWestern Energy customers away after October 1, 2007. That means that the City has only four months to find commercial and industrial customers to buy electricity to help pay for its share in the plant. For the past year the City has been saying it will secure these customers. It appears that possible customers are starting to understand the financially risky and high cost nature of the plant, and are hesitant to sign long-term contracts for its electricity.

The Deregulation Disaster

In 1997, the Montana Legislature made one of the greatest public policy blunders in its history, with the enactment of SB 390 deregulating the electric utility industry.  The decision was made over the strong protests of more than a dozen consumer, low-income, and environmental organizations, and a mere 36 farsighted legislators.  The fallout was even worse than the opponents predicted, with a cascade of unintended, devastating consequences to Montana’s ratepayers, economy, and environment.

The first (and perhaps worst) of these misadventures was the surprise sell-off of Montana Power Co.’s electricity generation facilities to a solitary out-of-state company, Pennsylvania Power & Light (PPL).  As the dominant generator of electricity in the state, PPL Montana has made hefty profits charging Montanans unregulated “market-based” power rates. 

Other impacts of deregulation were quick to follow.  Most Montanans are well-versed in the ensuing price spikes, layoffs, and bankruptcies.  All in all, the wreckage has been severe enough to render infamous the term “deregulation,” and to make legislators shudder when their proposals are assigned the designation “SB 390.”

2007 Legislature Repeals Dereg Laws

On May 14th, ten years and 12 days after Montana started down this unfortunate path, Montana Governor Brian Schweitzer signed into law HB 25 (Rep. Alan Olson, R-Roundup) to repeal most of what remained of SB 390.  In his signing statement, the Governor declared deregulation “an unmitigated disaster for Montana.”  While this bill does not go so far as to re-establish control over the power plants formerly owned by Montana Power Co., it does allow NorthWestern Energy (NWE) to more effectively pursue long-term, low-cost contracts for its customers and to build its own generation facilities.

In MEIC’s view, NWE has a legitimate need for some type of “firming” resource that can quickly respond to variability in supply and demand and help balance the system.  Such a resource (whether a power plant or energy storage technology) would assist NWE to integrate additional wind power into its supply portfolio, meet the requirements of Montana’s Renewable Energy Standard, preserve reliability, and diminish the market power currently enjoyed by PPL Montana.

As is the case with any legislation of this magnitude and consequence, the details are critically important.

Amendments added in the Senate provided the key environmental and consumer protections that were necessary to secure MEIC’s support.  For example:

• A proposed power plant cannot be approved by the Public Service Commission for inclusion into a utility’s rate base until the final air-quality permit is obtained and the public has had an opportunity to review that permit and submit comments to the Commission.  
• The PSC cannot approve a proposed coal-fired power plant unless either the state or federal government has adopted a law or regulation requiring carbon sequestration, or the plant will actually capture and sequester at least 50% of its carbon dioxide emissions. 
  
• Likewise, a proposed natural gas-fired power plant must mitigate a portion of its carbon dioxide emissions through the use of certified reductions or carbon offsets.  

An side benefit of this bill is that it will prevent the partners in the Highwood Generating Station from siphoning additional customers from NWE’s system, in an attempt to make the oversized plant viable.  In general, the model of “customer choice” (whereby customers leave the utility in search of competitive third-party power suppliers) has proven itself unsuccessful in Montana and elsewhere.  In 2003, the Legislature recognized that “retail” choice carried as much risk as reward for small customers, and passed a bill to limit the amount of electricity load that could leave the system each year.  Without a reliable customer base, it is difficult for a utility to plan for the future and to secure long-term, low-cost resources.  But rather than definitively closing the book on deregulation that year, lawmakers instead extended the “transition period” to 2027.  It is gratifying that the legislature finally jettisoned that model completely, so that Montana can move toward a different future — one that emphasizes clean, affordable, and stable energy.

In addition to multiple consumer and environmental groups, the final version of HB 25 was supported by the Montana Consumer Counsel and PSC commissioners Jergeson, Mood, Raney, and Toole.  Commissioner Molnar, PPL Montana, the City of Great Falls and several other parties opposed it.  The bill was ultimately approved in the House on a 60-40 vote, and in the Senate 29-21.