A Montana district court in Billings today upheld a Public Service Commission ruling that Northwestern Energy cannot charge consumers for the cost of replacement power the utility bought when one of the generating units at Colstrip had an unplanned outage. Northwestern had challenged the 2016 PSC determination in court. The court’s decision means consumers will not pay $8.2 million in extra charges.
"The decision sends an important message to the state's regulated utilities, that they cannot automatically assume expenses like these will be passed on to ratepayers. The burden of proof is on the utility to prove to the PSC that they have acted responsibly. In this case, NorthWestern did not, and therefore, consumers needed to be held harmless," said Commissioner Roger Koopman, (R-Bozeman.)
In 2013, Colstrip Unit 4, of which Northwestern owns 30 percent, had to be shut down for almost seven months. The cause of the outage was linked to damage done when the power plant’s rotor was reinserted following maintenance, causing insulation around the generator core to be compressed. When the plant came back online, the generator catastrophically failed. During the time the plant was shut down, Northwestern purchased electric power on the market to replace the power lost from the inoperative generator.
The utility asked the PSC to recoup the additional costs from ratepayers. NorthWestern contended that the PSC should be obliged to “presume” that the utility acts prudently. It also argued that the utility could not be held responsible for the actions of the contractors to whom plant operations and repairs had been delegated.
In a heavily contested 3-2 decision, the PSC voted not to allow NorthWestern to pass along these costs to consumers, after concluding that the utility had not demonstrated the plant was operated prudently. In its order, the PSC found that an electromagnetic core imperfection detector test might have identified the damage to the generator prior to the outage. The PSC also faulted NorthWestern for not having conducted closer oversight of the plant’s operations, and concluded that NorthWestern failed to investigate both purchasing insurance and seeking damages from other parties involved in the outage in a timely manner. Judge Rod Souza’s order specifically upheld the Commission’s findings on each of these points.
“This ruling is good news not just for the $8.2 million at stake in this instance. It’s also welcome because it establishes a clear precedent that there are times when the utility must take responsibility when its property fails to perform, and cannot simply hide behind contractors or other third parties to avoid that responsibility,” said Travis Kavulla, (R., Great Falls), vice-chairman of the Commission.