NorthWestern announces new energy contracts

Yet-to-be-complete plants will supply 150 megawatts for Montanans

HELENA – NorthWestern Energy said Thursday it would be signing 10-year power supply contracts for 130 average megawatts from a sister company’s Montana First Megawatts gas-fired power plant in Great Falls and for 20 megawatts from Basin Creek’s gas-fired plant near Butte.

By CHARLES S. JOHNSON Missoulian State Bureau

The contracts will help the company obtain the electricity necessary to supply its 290,000 default supply customers in Montana. NorthWestern officials weren’t immediately clear how the signings of the two contracts would affect future electricity rates for Montana consumers.

NorthWestern later will have to come before the Montana Public Service Commission to seek recovery of the costs of buying the power from these two plants to supply Montana consumers.

"The important thing is that any expenses or any costs that they occur are prudently incurred," said Public Service Commissioner Bob Anderson, D-Helena.

PSC policy adviser Susan Good said, "We find it pretty interesting to see that NorthWestern is signing these contracts without (PSC) preapproval. We never thought they needed preapproval, and neither did they. As long as they do everything right, chances are they will get their money back. We’ll see if they did everything right."

The contract decisions were announced in Great Falls, where construction of NorthWestern’s planned 240-megawatt plant north of town was halted in July after the PSC rejected, at least for the time being, proposed electricity supply contracts for the Great Falls plant and others.

Great Falls Mayor Randy Gray praised the decision to build the large power plant in his city as "a huge development not only for Great Falls and northcentral Montana but all of Montana" as well as electricity customers. Gray said the power plant has the potential of being an anchor for other businesses in the area.

"I’m proud that Great Falls will continue to live up to its name as Montana’s Electric City," Gray said.

Mike Hanson, president and chief executive officer of NorthWestern Energy, said the utility recognized the value of having dispatchable, on-demand electricity available from the gas-fired plant. Montana First Megawatts is expected to be completed and supplying power to NorthWestern Energy by late 2003. NorthWestern will have the option of renewing the contract in 10 years and adding 20 megawatts more of capacity, he said.

Construction of the $150 million Montana First Megawatts project is expected to resume this fall. The project has all of its necessary permits and is about 40 percent completed, including installation of turbines and generators, according to Eric Jacobsen, president of Montana Megawatts, another NorthWestern Corp. subsidiary.

The 100-megawatt Basin Creek plant near Butte, is expected to be operating by the mid-2003 or later, with NorthWestern buying one-fifth of the electricity.

"As the default supplier, we believe it’s our obligation to have a reasonable supply of energy," Hanson said. "It can’t be stored."

The energy from the Great Falls plant will be able to be dispatched quickly as NorthWestern’s demand requires, Hanson said.

In June, the PSC found that NorthWestern Energy prudently arranged power supply contracts it had signed with PPL Montana for 150 megawatts for five years and 111 megawatts with Duke Energy for five years.

However, the PSC declined to preapprove other contracts proposed by NorthWestern unless they are determined to be prudent, including one with the Great Falls plant.

NorthWestern has said it needs about 1,100 megawatts during its peak, or during the coldest days of the winter, and an average of 550 to 600 megawatts.

After the PSC decision in June, Hanson said, NorthWestern conducted a competitive bidding process and had two outside consulting firms evaluate the various bids from 10 suppliers in the Northwest. Hanson said a third consulting firm was hired to evaluate extreme-case scenarios for what might happen to electricity and natural gas prices.

The proposed Montana First Megawatts plant in Great Falls was determined to be "the best economic solution," Hanson said.