NorthWestern Energy's electric rates among highest in region

Among the major private and public utilities in Montana, Idaho, Wyoming, Oregon, Washington and western South Dakota, only one – Black Hills Power of Rapid City, South Dakota – is charging residential customers a higher rate for electricity, as of next month.

Black Hills’ rates come in at 12.19 cents per kwh for a residential customer. An average home probably consumes about 800 kwh per month.

For that average customer, a NorthWestern Energy electric bill in July will be just under $88. The only utilities whose customers have a higher monthly bill at that consumption level are Black Hills and Portland General Electric, which has a higher monthly flat fee it charges all customers.

NorthWestern Energy spokeswoman Claudia Rapkoch says the company’s electric rates have always been among the highest in the region, for many reasons. The company serves more rural customers than many other utilities in the Northwest and pays much higher property taxes, she says.

Rapkoch also says the July rate is a “snapshot in time,” that the company’s rates have been higher and lower in the past, and will fluctuate in the future.

The July rates include a 6.5 percent increase approved last week by the state Public Service Commission, to reimburse NorthWestern for a $32 million under-collection of revenue last year.

Upon further examination, the PSC may adjust that increase. But the prospect for even higher rates in the future is likely, some observers say, as NorthWestern continues to rebuild itself as a utility that owns more of its power generation – rather than buying power on the market – and upgrades its distribution system.

Unlike other utilities in the region, NorthWestern – as Montana Power Co. – underwent deregulation, which led it to sell off its power plants in the late 1990s. Since 2007, it’s been attempting to buy back those power-generation resources, which is expensive.

For example, the company wants to pay $900 million to buy 12 hydroelectric and storage dams – a cost that will increase rates for many years – and has embarked on a multimillion-dollar maintenance plan.

“Unfortunately, I see this upward pressure on rates continuing,” says Montana Consumer Counsel Bob Nelson, whose office represents customers in rate cases before the Public Service Commission. “(NorthWestern) seems to place value on charging higher rates now, saying even though they’re higher now, they are stable into the future. It’s kind of a judgment call that they’re making.”

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The Missoulian State Bureau examined current electric rates for homeowners served by a dozen utilities in Montana and the Northwest. Highlights of the survey include:

• For customers consuming 800 kwh a month, only NorthWestern, Portland General and Black Hills charge more than 10 cents per kwh. Black Hills is the highest at 12.19 cents.

• Avista Utilities, based in Spokane, charges the lowest rate of 7.27 cents per kwh, at the 800-kWh-per-month consumption level, for its 241,000 customers in eastern Washington.

• Montana-Dakota Utilities, the second-largest private utility serving customers in Montana, charges an average of only 8.1 cents per kwh, for a homeowner consuming 800 kwh per month. Its customers are in eastern Montana.

• Many other utilities and co-ops have “tiered” rates, charging lower rates for less usage, and some have seasonal rates, charging less during high-consumption winter months. NorthWestern charges a flat rate for all consumption.

Larger public utilities and electric cooperatives tend to charge the lowest rates, because they’re nonprofit and have access to low-cost power from the federal Bonneville Power Administration.

Flathead Electric Co-op, which serves 61,000 customers in Kalispell and northwestern Montana, charges its customers just 5.9 cents per kwh for the first 600 kwh of monthly consumption, and Seattle City Light charges just 5 cents per kwh for the first 300 kwh per month in the summer and the first 480 kwh in the winter.

Wendy Ostrom-Price, spokeswoman for Flathead Electric, says the co-op gets nearly all of its power from BPA; Seattle City Light gets about 40 percent of its power from the same source.

Rapkoch says NorthWestern Energy’s high property taxes are a big reason for its relatively higher rates. NorthWestern pays taxes on 12 percent of the value of its transmission and distribution system, while electric co-ops pay on only 3 percent of their system’s value in Montana.

About 10 percent of NorthWestern’s costs are taxes, Rapkoch says. For other large private utilities in the Northwest, its usually 2.5 percent to 3 percent – although Seattle City Light says its taxes also are about 10 percent of its revenue.

Other utilities in Washington, Oregon and Idaho also get higher BPA credits, which are offsets that directly reduce their customers’ bills, at a higher amount than NorthWestern, which also gets some BPA credits, she says.

“There are differences,” Rapkoch says of NorthWestern and its counterparts in the region. “Those aren’t excuses. They’re largely a function of our service territory and who we are.”

Finally, NorthWestern is the only private utility in the region that underwent deregulation or “restructuring,” during which it sold off its power plants. Now, it’s re-investing in power-generation resources.

Public Service Commission Chairman Bill Gallagher, R-Helena, says it’s like shifting from renting to owning – and that means higher upfront costs, with the chance for lower costs in the long run.

“It’s like buying a car, or a new house, would affect your family’s budget,” he says. “That is going to have an impact short-term on the ratepayers. The notion, however, is that at some point, that car or house gets paid for, and over the long haul, you’re going to be better off owning than renting.”