HELENA – Montana’s 1997 experiment with electric utility deregulation left a trail of economic wreckage in its wake – but that isn’t stopping Democratic lawmaker Tom Woods from proposing that Montana try it again.
“We’ve been educated by that (experience),” he said. “I’d like to have another crack at it.”
Rep. Woods is sponsoring House Bill 438, which is remarkably similar to the same bill in 1997 that dictated “restructuring” or partial deregulation of electric utilities in Montana.
Like under the previous bill, HB438 says utilities like NorthWestern Energy would have to sell or separate their power-generating assets and allow Montana consumers to shop for and buy electric power on the open market.
NorthWestern and other utilities would still run the regulated distribution system of power lines and hookups to homes and businesses. But the actual power would be supplied by whoever operates the power plants or middlemen who arrange power contracts.
Montana largely abandoned deregulation more than 10 years ago, allowing NorthWestern to start reacquiring power plants and dedicating their output to regulated customers.
But Woods said under this re-regulated system, NorthWestern has purchased power sources at prices that turned out to be well above what’s available on the market – and is charging consumers for the cost, over many years.
NorthWestern and other utilities also have made it difficult for small, innovative sources of alternative power to develop, such as community solar-power projects, Woods told MTN News.
“The existing monopolies have been really, really dragging their feet on any kind of diversification of the grid,” he said. “I’m tired of it; consumers are tired of it. Some of the small alternative-energy businesses are really tired of it.”
NorthWestern Energy, which has 370,000 electric customers in Montana, says it will strongly oppose HB438, which has its first committee hearing on Friday.
“Twenty years ago, when this state adopted dereg, it really turned into one of the biggest economic and colossal disasters the state has ever seen, with the total failure of Montana Power Co. and its parent company, Touch America,” said David Hoffman, director of government affairs for the company. “Many, many people lost their 401Ks and their pensions.”
Since NorthWestern has been in the state, it’s been rebuilding the regulated electric system that was dismantled by deregulation, he said.
Some of the power sources purchased by NorthWestern are providing power at costs usually higher than the open market, he acknowledged. But those assets will provide power at stable rates over the long term – even when the market may spike upwards, for whatever reason, Hoffman said.
“I think that gives our customers peace of mind, if you will, knowing what the price is going to be – and being able to ride through any fluctuations that drive prices up,” he said. “We are seeing those right now (with the severe cold weather).”
NorthWestern’s predecessor, Montana Power Co., was the major backer of the 1997 deregulation bill. Within four years after the bill’s passage, MPC sold off its power plants, coal mines, natural gas wells and ultimately its power lines and converted to Touch America, a telecom company.
Touch America soon went bankrupt and hundreds of MPC retirees saw their pension assets become worthless.
NorthWestern bought the distribution system in 2001 and, after going bankrupt itself, began rebuilding the regulated system, with the company acquiring power plants or portions of power plants.
It bought a strip of long-term power from the coal-fired Colstrip 4 power plant a decade ago and then repurchased the hydropower dams that MPC sold off in 1998.
Woods says NorthWestern overpaid for these assets, while power has often been available at much lower cost on the regional market.
“Basically, the consumers are not benefiting from having monopolies,” he said. “What this bill does is say, `Hey, let’s take a look at this.’ Let’s give the (Public Service Commission) the ability to break up these monopolies if they think it’s necessary. I think it’s necessary.”
Hoffman notes that all of NorthWestern’s power-plant purchases have been approved by the PSC, as being in the best interest of consumers and the company. The company has reconstructed “what was a very successful model in the vertically integrated system,” he said.
Story by Mike Dennison, MTN News