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Commission functions 

One of the smallest agencies in Montana state government, the Montana Public Service Commission (PSC) strives to ensure that ratepayers have continued access to utility services that are affordable, reliable, and sustainable for the long-term. In pursuit of this goal, the PSC regulates the rates and service quality for investor owned electric, natural gas, water, waste-water, and legacy telecommunication companies. Though they differ in form and function, companies in these industries all have one thing in common, they are monopolies with a captive set of customers. It’s the PSC’s job to balance the interests of ratepayers who are concerned about utility rate increases, with the need to maintain a financially sound utility that is capable of providing reliable service. 

The PSC plays a vital role in protecting public safety by inspecting railroads and ensuring the integrity of intra-state pipelines. 

Railroads:  State agencies have limited authority to enforce rail safety in the United States, as rail safety is primarily under federal jurisdiction, however the PSC participates in the Federal Railroad Administration’s (FRA) voluntary rail safety program with two state inspectors who enforce FRA Policy. Learn More

Pipelines: The PSC participates in the Federal Pipeline Safety Program with 3 inspectors who are responsible for enforcing federal and state pipeline safety regulations. The role of the program is to ensure the safe, construction, operation, and maintenance of intrastate gas pipelines in Montana. Learn More 

The PSC also provides limited oversight over the transportation industry, including garbage trucks, taxis, and limousines. Although the Commission does not set the rate for all of these services, it does regulate the entry to and exit from the market place, as well as accept service complaints from customers. 

History & Organization 

Regulation of public utilities in Montana has evolved from the 3-member Board of Railroad Commissioners created by the Legislature in 1907 to the present 5-member Public Service Commission. In the past, 3 commissioners were elected statewide to 6-year staggered terms, but in 1974 the Legislature expanded the commission to 5 members who are elected from regional districts to 4-year staggered terms. The commissioners elect a chair from among themselves every other year.

The Department of Public Service Regulation provides staff support for the commission. The department's three divisions are Regulatory, Legal, and Centralized Services. Employees include economists, accountants, attorneys, rate analysts, enforcement and compliance personnel, and support staff.

Jurisdiction 

The PSC generally regulates private, investor-owned natural gas, electric, telephone, water and private sewer companies doing business in Montana. In addition, the PSC regulates certain kinds of motor carriers, including garbage trucks and passenger motor carriers. The PSC also oversees rail and pipeline safety regulations in the state. 

Not all utilities in Montana are regulated by the PSC. Outside PSC jurisdiction are: rural electric and telephone cooperatives; cellular telephone companies; internet service providers; cable TV companies; the quality of municipal water and sewer services; and propane dealers. To learn more about the PSC’s jurisdiction view How The PSC Can Help. 

How Utility Rates Are Set

The process of setting utility rates is somewhat like the process a banker uses in making a business loan. Bankers usually ask applicants for detailed financial statements. A banker and a loan applicant may discuss whether or not the financial statements, which depict a historical period, will accurately represent the future. If the banker thinks that some future event may affect the business by either increasing or decreasing earnings, then that factor may be used to adjust the historical financial statements. This, in turn, may cause the banker to increase or decrease the loan amount. Naturally, bigger businesses are more complicated to analyze. Businesses as big as major public utilities are very complicated.

The PSC's rate-setting process is like the banker's loan process, although the PSC certainly doesn't lend money. Before the PSC sets a utility's rates, it analyzes the company's financial statements for accuracy, examines its operating practices to ensure efficiency, and reviews known future events that may affect the business.

There is a major difference between the PSC and the banker, however. The banker would be pleased if a loan applicant could make very high profits. By law, the PSC must allow only those profits that are just and reasonable. In other words, the PSC must allow utilities an opportunity to earn just enough profit so that utility owners will have the incentive to provide adequate service to customers. No more, no less. It is this public interest protection that makes the PSC unique.

After the PSC examines all the factors affecting a utility's profitability, it approves a total revenue level. One more matter is then considered: how much should each customer group be charged? The charges from all groups must equal the total revenue level and customer groups cannot be discriminated against. For example, if each customer were exactly equal, simple division of the total revenue level by the number of customers would equal a nondiscriminatory rate. In practice, however, customers are not equal. Some use more of the utility's service than others; some use it at peak times; some live in towns where service is readily available, while others live in isolated areas where the cost of service may be quite high; and some have alternatives to utility service. These are only a few of the differences among customers that the PSC must consider to avoid rates which unduly discriminate in favor of any customer or customer group. From these factors, balanced against the total revenue level, the PSC calculates rates, usually by unit of consumption.