Challenging a rate case built on falsehoods (Part I)

Montana Power Company – Northwestern Energy’s predecessor as the primary electric utility in Montana – owned 30% of Colstrip Units 3 and 4.

In 1974, a statewide survey showed that Montanans, by a 2-to-1 margin, opposed building Units 3 and 4 because of their likely effect on electrical rates and the fact the it was doubtful the power would even be needed to serve Montana customers for years to come.

Falsehood #1: Ever-increasing electrical demand

In 1976 hearings on Units 3 and 4, we challenged the accuracy of MPC’s forecast for steadily increasing electrical demand. Time proved us right.

William Johnson, a former PSC staffer, testified on behalf of Northern Plains at the 1976 Board of Natural Resources hearing, predicting that, if Units 3 and 4 were built, Montana Power would thereafter be seeking a very large rate increase. MPC lawyers desperately (and unsuccessfully) attempted to have Johnson’s testimony stricken from the record, calling it “irrelevant, incompetent, immaterial, conjectural, of no probative value, speculative, hypothetical, ambiguous, confusing, and misleading.”

Johnson’s 1976 forecast turned out to be correct. In 1983, as soon as Unit 3 was built, MPC came to the Public Service Commission for $96.4 million rate increase to help pay the cost of running the plant. This request amounted to an increase of 55% on electrical rates for MPC’s residential and rural customers.

Northern Plains and many other groups intervened to oppose the rate increase before the Public Service Commission. (It was probably the only time Northern Plains has been an ally of Exxon.) Northern Plains Chair Toni Kelley said when we intervened that, “…power from Colstrip 3 and 4 is not needed. Montana’s ratepayers should not be forced to pay for it.”

At the time, the Public Service Commission followed a “used and useful” doctrine, the question being whether Montana ratepayers are likely to use the power generated in useful ways. The new Colstrip 3 plant was having trouble meeting that test.

The PSC scheduled a series of hearings during the spring of 1984. Northern Plains and other organizations held many town meetings across the state before the hearings began. Our canvassers collected thousands of petition signatures against the rate increase. Montanans turned out in a big way to oppose MPC’s request.

Falsehood #2: Montana will suffer if Units 3 and 4 are not built

Montana Power’s response to being challenged was to repeatedly threaten that there would be blackouts if the two plants weren’t built on their schedule.

The manager of one rural electric cooperative went to bat for MPC, saying “If Colstrip 3 had not been on line during the extremely cold weather last December [1983], we may well have had blackouts or brownouts throughout the state.”

However, Northern Plains member leader Bill Gillin pointed out in an open letter that MPC’s own figures showed that the company was selling power out-of-state during that same cold snap.

In fact, Montana Power’s president admitted during questioning by Northern Plains’ attorney that MPC had made an offer to sell 150 megawatts – about half of Montana Power’s share of the plants’ capacity – to the Bonneville Power Administration to be sold in California. This revelation undercut MPC’s claim that the power from Units 3 and 4 was needed to prevent power blackouts in Montana.

The 1980s in Montana showed that Montana Power would say anything to get what it wanted, and that the company expected ratepayers to pay for the company’s bad management and lousy decision-making.

Northern Plains’ Wally McRae observed at the time, “The ratepayers should not have to bear the financial burden for the company’s mistakes.”

This 1984 cartoon, originally published in the Billings Gazette and reprinted here with permission, illustrates how Montana’s energy corporations have long sought to gamble with customers’ money while shielding shareholders from risk.

Look for Part II of this story in the next edition of the Plains Truth to discover how this case turned out and what we might learn from it regarding our current rate case battles. To receive a copy of the Plains Truth, become a member today!

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