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Montana's NorthWestern down but not out
NorthWestern Energy's parent company filed for bankruptcy September 14, placing the future ownership of the utility's assets and stability of electricity rates for 300,000 Montanans in doubt. But there's hope that NorthWestern Corporation will emerge from bankruptcy court a stronger entity divested of money-losing subsidiaries and more focused on profitable utility operations.
Northwestern's Chapter 11 bankruptcy, filed in Delaware, surprised few observers. NorthWestern is swamped with $2.2 billion in debt, has suspended dividend payments, earned a rock-bottom credit rating, and its stock has been de-listed by the New York Stock Exchange.
In the near term, the filing appears to have restored a degree of confidence and purpose that had been sorely lacking at NorthWestern Energy (NWE). A judge's order ensures that the utility continues to operate as normal, offering much-needed reassurance to nervous customers and employees.
But it's uncertain what long-term and wide-ranging economic, political, and environmental repercussions will result.
The good news is that NorthWestern Corp. has moved to sell off unprofitable subsidiaries rather than shutter the utility or liquidate NWE's assets. Further, the bankruptcy judge approved the company's motion to shield from creditors programs vital for renewable energy development, energy efficiency, and low-income bill assistance. NWE collects roughly $8 million annually for those public purposes through the legislatively mandated Universal Systems Benefit charge. Also protected are funds associated with NWE's new E+Green program, which allows customers to choose green power derived from certified, environmentally preferred renewable energy sources like wind and solar.
Wind Projects Suspended
But NorthWestern's dismal financial condition is undermining its ability to acquire new power resources – and that could mean bad news for NWE ratepayers. A significant portion of NWE's energy supply portfolio – about 30 percent – is currently derived from short-term market purchases, which leaves customers vulnerable to rapid electricity price increases. (NWE supplies electricity to 80 percent of all Montanans.)
Proposed generating projects could reduce the price instability, but NWE's poor credit rating has hampered efforts to nail down contracts.
The utility hopes to bring online two 75-megawatt wind projects (Wind Park Solutions at Judith Gap, and the Whitehall Wind Project) and a 48-megawatt natural-gas fired power plant in Butte. The Butte project (called Basin Creek – not to be confused with the proposed 500-MW Continental project) is a dispatchable resource that would be used to complement the wind projects. The developer has signed a legally binding greenhouse gas mitigation agreement with the Montana Environmental Information Center. The utility also proposes a solid conservation investment: 100 average megawatts over 20 years.
NWE plans to submit these contracts to the Montana Public Service Commission in December. Both the Commission and the bankruptcy judge will have to approve them before construction can begin.
Looking After the Ratepayers
Another worrisome detail is whether Montana state agencies will be able to effectively watchdog the public interest during the restructuring negotiations. Public Service Commissioners have warned that the PSC cannot afford to hire the outside legal counsel necessary to follow the proceedings in Delaware.
"Most of the focus [of the bankruptcy case] is on the creditors, and no one is really in there focusing on the ratepayers," says PSC staff economist Will Rosquist.
PSC commissioners sent a letter to Governor Judy Martz and legislative leaders October 21 requesting a special session of the legislature to give the PSC more spending authority for hiring bankruptcy experts.
Commissioners say the situation has become an emergency, but Martz says she won't call the special session.
Attorney General Mike McGrath is trying to gain clout in the proceedings by asking for a seat on one of the creditor and bondholder committees. "We want to avoid a situation where Montana ratepayers are going to be asked to bail out this company," says McGrath. The judge has yet to grant the request.
NWE's progress on the environmental front would probably be lost if NorthWestern fails in its reorganization attempt. If the utility's "poles and wires" assets were auctioned off, likely purchasers would be the Montana electric cooperatives or Montana-Dakota Utilities Co., none of which are as friendly to clean energy development, distributed generation, or progressive rate structures that encourage conservation.
On the other hand, a liquidation that results in the establishment of an independent, nonprofit, and democratically run public power authority could bring new benefits to both consumers and the environment.