Article published Jun 1, 2007

NorthWestern lowering electricity rate in July

By JO DEE BLACK

Tribune Business Editor

Montana Public Service Commissioner Greg Jergeson admits he was holding his breath in anticipation of NorthWestern Energy's filing for an electric rate change Thursday.

He can exhale.

The utility that serves 322,000 customers in Montana will lower the rate for electricity on July 1. A typical residential customer using 750 kilowatt hours of electricity a month will receive a bill of $75.26, compared with $76.78 under the present rate structure — an overall decrease of 1.98 percent.

NorthWestern Energy's contract with PPL Montana for 56 percent of the electricity in the utility's supply portfolio is expiring June 30, and Jergeson feared consumers could be faced with a heavy rate hike in the middle of prime air-conditioning season.

"It is a relief, we have been expecting an increase," Jergeson said.

That's logical. Under the expiring contract, NorthWestern pays 3.7 cents a kilowatt hour. The new contract charges 5.6 cents a kilowatt hour.

There are a couple of reasons consumers who are consistent with their electricity use will see a lower bill, said Claudia Rapkoch, NorthWestern's spokeswoman.

For the past eight to nine months, NorthWestern has been gradually increasing charges, in addition to the normal charges for electricity supply and transportation costs, she said.

"That's because as we transitioned to this new supply portfolio of electricity contracts, we wanted to avoid drastic sticker shock," she said.

The extra charges created a pool to offset the anticipated rate increase.

The plan derailed a repeat of the 2002 electric rate increases that resulted the last time NorthWestern entered into new supply contracts with PPL. After enjoying a four-year rate freeze, consumers were hit by consecutive hikes as the utility bought electricity on the new, deregulated market.

Five years ago, that market was evolving, Rapkoch said. NorthWestern, named the default electricity supplier for residential customers, hesitated to lock up long-term supplies.

"The default supplier was always intended to be the supplier for last resort, a bridge until the competitive markets for residential business developed," she said. "That never happened."

This year, NorthWestern added more supply sources to its portfolio. PPL's contract is for 37 percent of the long-term supply, and that tapers to roughly 23 percent by 2014. NorthWestern also has an 18 month short-term contract with PPL.

"We have a much more diverse portfolio, we are not dealing with one large chunk for our base-load contract," Rapkoch said.

That's not to say consumers won't see electric rates rise. NorthWestern's transmission costs have remained steady, but increases and decreases in the wholesale price of electricity are passed through to ratepayers.

"Prices will change, they will go up and down, but we are not expecting the volatility of other commodities, such as natural gas," Rapkoch said.