The Billings City Council is drafting a letter to the Public Service Commission after councilmembers stated their disapproval of NorthWestern Energy’s 17% rate increase.
Such a political action may be unprecedented for a Montana municipal body in recent history. However, with the rate increase going forward as is, Billings leaders estimated an increase of budget expenses of nearly $1.5 million for its utilities as the body considers a $440 million proposed budget.
“We have to raise our hand and say ‘whoa, whoa, whoa,’” councilmember Scott Aspenlieder said. “You’re impacting two ways ratepayers are billed. You’re impacting them on the bill, but they’re going to get it doubled based on the cost that gets fed back through our municipal services as well.”
Council members made a decision to begin working on the letter to the PSC regarding the rate increase Monday night. The body held off from making a decision on whether they would explicitly oppose approval of the hikes or instead plainly express what the increase will cost Billings and its constituents in the letter.
The city is currently looking at ways to account for a $2.3 million shortfall in revenue as it considers next fiscal year’s budget. Additionally, the council had approved a plan in April to give residents a pause most increases to city utility rates and street maintenance fees next year.
NorthWestern Energy is one of Billings’ biggest taxpayers, paying nearly $18 million to Yellowstone County in the 2024 fiscal year. The company has justified the rate increase citing hundreds of millions in investments made in electricity capacity and transmission, including the costs of firing up the gas plant near Laurel last fall.
Aspenlieder said NorthWestern is making those investments to attract large data centers and industrial users into the rate base. He considered such projects likely to be developed elsewhere out of city limits.
“From a city perspective, we stand zero to gain and only things to lose here,” he said.
In December, NorthWestern announced plans to distribute energy for two separate data centers near Butte. They will initially provide 125 megawatts to the both of them in their starting years with plans for the demand to grow to a total of 400 megawatts by 2030. For comparison, the new Yellowstone County Generating Station provides only 175 megawatts of power.
“You can make the argument that the increased capacity generation or new growth benefits ratepayer X in the Heights and ratepayer Y on the West End, but that’s a really, really hard argument to recover costs on generation facilities that weren’t necessary but were built for excess capacity and built for wholesale and retail sales,” Aspenlieder said.
In a statement to the Gazette, NorthWestern Energy spokeswoman Jo Dee Black said the Yellowstone County Generating Station was developed to address a critical capacity gap identified a decade ago.
“This need was recognized well before any data centers expressed interest in locating in the state,” Black stated. “The plant’s location was selected to support system stability for Billings and surrounding communities. YCGS plays a vital role in Montana’s energy future. It reduces the need to import high-cost energy during peak periods, provides generation in all weather conditions and is a backup resource for renewables like wind and solar — enabling more clean energy on the grid.”
In the statement, NorthWestern said they look forward to continued conversations with the Billings government and its residents.
The letter by council would come after several days of testimony in a PSC hearing over the rate increase. NorthWestern had already raised customers’ rates by 17% in May without approval from the PSC. If the PSC rejects the rate increase partially or fully, then electricity customers will get a refund on the costs, including interest. The regulatory body is expected to come to a final decision by this fall.
During the Monday meeting, former Montana Public Service Commissioner Tony O’Donnell told councilors that it would be a “very poor” decision for the government to make a decision opposing the rate increase “without having the facts of the case.”
“For this body to recommend that the rates not be increased, that goes beyond the ability of the Public Service Commission to say yes or no to something,” O’Donnell said.
In 2023, the PSC had approved a 28% increase in electricity rates for residential customers. Still, the PSC had previously approved an interim rate decrease late last year with NorthWestern and rejected a proposed Montana-Dakota Utilities Co. rate hike in October.
Since NorthWestern has a monopoly on electricity, they have to provide the utility for all of the people of Montana. Coupled with that is the pressure to stay competitive, O’Donnell said, which means maintaining a certain rate of return to attract investors to make investments in the electricity grid.
“That’s a very heavy responsibility,” O’Donnell said. “When it gets to 45 degrees below zero for a week at a time in Montana, NorthWestern Energy does not have the power to keep people warm.”
Councilors will work on the letter at the next budget and finance committee in the coming weeks before moving a decision on the language of the document to the full council expressing Billings’ position on the rate hike.
“I am getting a ton of calls. I think it’s ok to say we are hearing loudly from the community that they are deeply concerned about it,” council member Jennifer Owen said.
Organizations and ratepayers have turned out broadly in opposition to the rate increase during public PSC hearings that will conclude this week.
“For months, our members have been working to raise awareness about NorthWestern Energy’s repeated abuses of its monopoly status with Billings residents and our elected officials,” chair of Yellowstone Valley Citizens Council Kris Glenn said in a statement to the Gazette. “[. . .] Our families and small businesses simply can’t afford to absorb the $1.5 million dollar increase to the city. Those costs would inevitably be passed on to us on top of our individual power bill increases. It’s time for the Public Service Commission to rein in this monopoly utility, and we appreciate our City Council supporting that effort.”
