State By State Proposals - Montana
Montana’s Electricity Future
State Snapshot
Though approximately three in 10 Montanans are served by rural electric cooperatives, investor-owned NorthWestern Energy looms large in Big Sky Country. Montana-Dakota Utilities serves three cities in the eastern half of the state – about 5 percent of the state’s customers; NorthWestern gets nearly everybody else. Despite the fact that the state could use wind power to meet all of its electricity needs, most Montana power comes from coal and Montana lags behind other states in developing clean energy resources. In addition, Montana is a net exporter of electricity, sending approximately one-half of its electricity generation out of state.
NorthWestern is the default supplier for all former customers of Montana Power Co. Montana’s 1997 deregulation law established retail competition for all customers of Montana Power Co., and turned the electric industry on its head. In response, Montana Power Co. sold most of its generating facilities to Pennsylvania Power and Light (PPL Montana) and its distribution assets to NorthWestern Energy.
The 2000-01 energy crisis hit Montana industries particularly hard. Many industrial customers were buying power directly from wholesale marketers and faced skyrocketing prices for electricity. Thousands of workers lost their jobs as unaffordable power forced industries to close down.
The evolution of deregulation law in Montana has been a long rough road, but the singularly most positive element has consistently been the universal system benefits charge (USBC), which raises more than $13 million a year for energy efficiency, renewables and low-income energy services. USBC funds are invested in solar and wind projects for schools, homes, ranches, businesses and even fire stations. The USBC has been authorized through December 2005, but the Citizens Energy Plan calls for the program to operate with no sunset and at a higher funding level.
As part of its oversight responsibility, the PSC must ensure ongoing implementation of cost-effective energy efficiency programs and systematic development of renewable energy projects. The recently adopted default supplier procurement rules include acquisition of clean energy as key components of the default supply resource mix. Establishing a statewide renewable portfolio standard and a carbon dioxide mitigation program for new power plant emissions are important opportunities identified in the Citizens Energy Plan. Montana citizens can use the CEP to make sure they get the benefits of the enormous potential of clean energy development.
Priority Opportunities
Improve Resource Procurement Process and Default Supply Planning - Make certain that NorthWestern Energy’s default supply plan and resource procurement processes forward the goal of a clean and affordable energy future beyond current minimums. Use utility ratecases to advance mechanisms to remove utility disincentives to capture all cost-effective energy efficiency opportunities.
Stop New Coal Plant Development – Present energy efficiency and renewable energy resources as more cost effective and environmentally responsible alternatives to new coal plants. Intervene in permitting and resource procurement proceedings to challenge new coal plants. Educate Montanans that coal is dirty and clean coal is a half-baked idea.
Maintain and Enhance Universal System Benefits Program – Remove sunset provision to permanently authorize Universal System Benefits Charge beyond current sunset (2005). Increase funding level. Consider minimum funding allocation for each funding category.
Establish Renewable Portfolio Standard – Establish a standard for all retail electricity providers to include 20% renewable energy in their supply mixes by 2023. This standard matches the goal for the national renewable portfolio standard.
Improve Efficiency in Buildings and Equipment - Expand and promote existing tax credits to encourage investments in technologies and practices that go beyond codes and standards. Establish tiered credits to encourage consumers to utilize the most energy efficient design practices and technologies. Ensure that the Energy and Telecommunications Committee conducts comprehensive evaluation of energy efficiency opportunities in the state. Reduce state government electric load by 20 percent over the next decade. Improve state building energy code.
Increase Incentives for Renewable Generation – Promote new and established incentives and policies to support distributed renewable generation equipment for residential, commercial and agricultural applications. Expand application of net metering law. Increase marketing and promotion of green power products offered to retail customers.
Improve Low Income Energy Services - All utility weatherization programs should be revised to incorporate current state-of-the-art practices and comprehensive delivery approaches. Establish a statewide requirement for utilities to offer some form of energy bill assistance to eligible customers.
Policies to Deliver Montana’s Electricity Goals
Improve Resource Procurement Process and Default Supply Planning
Current Status: In March 2003, the Public Service Commission approved default supply guidelines for NorthWestern Energy to follow as it procures resources for its customers. These guidelines establish minimum requirements for energy efficiency and renewable resource procurement. NorthWestern Energy is in bankruptcy yet is still pursuing development and contracts for new renewable resources. In 2003, the legislature passed SB 247 which gives the PSC authority to give advanced approval of a power supply purchase thereby guaranteeing full cost recovery of prudent investments.
Recommendation: Work with the PSC and NorthWestern to ensure that new renewable energy projects are developed as part of the default supply mix. Participate in all resource procurement proceedings to ensure all cost-effective efficiency is acquired and all identified renewable energy resources are developed or procured.
Stop New Coal Plant Development
Current Status: A half dozen new coal fired power plants are proposed for development in Montana. State siting laws have been eliminated to facilitate faster permitting of new power plants. Multiple challenges exist in both state and federal court against the proposed 780 MW Roundup Power Project. Montana is currently transmission constrained such that new coal plants can not transmit power to the West without additional transmission lines being built.
Recommendation: Present energy efficiency and renewable energy resources as more cost effective and environmentally responsible alternatives to new coal plants. Efficiency and renewables can serve the needs of Montanans and avoid the need for merchant coal plants to sell power out of state. Intervene in permitting and resource procurement proceedings to challenge new coal plants. Support a broad-based multi-medium education effort to raise public awareness of the environmental and economic pitfalls of expanding Montana’s coal industry.
Maintain and Enhance Universal System Benefits Program
Current Status: In 1997, Montana implemented a Universal System Benefits program that sets aside 2.4% (over $13 million/year) of retail revenue for energy efficiency, renewable energy and low income energy services. The original authorization was for four years. It is now authorized through 2005.
Recommendation: Remove the sunset provision in the authorizing language for the Universal System Benefits Charge. Increase funding level from 2.4 to 3% of retail revenue to capture all cost-effective energy efficiency, develop renewable resources and assist more low-income households. Consider specific allocations of funds for each program area.
Renewable Portfolio Standard
Current Status: The USBC’ funding level for renewable energy development is insufficient to systematically encourage the development of new renewable energy resources. The Public Service Commission rules for default supply procurement offer an opportunity to increase renewable resource development for NorthWestern Energy.
Recommendation: Establish a statewide portfolio standard for electric utilities to ensure the development of new renewable resources. An appropriate goal would be to meet 20% of their load with renewable resources by 2023. Work with the PSC to ensure the appropriate acquisition of renewable resources to fulfill the default supply obligations.
Improve Efficiency of Buildings and Equipment
Current Status: The 2003 legislature approved a bill to study the options for improving the building energy code and other efficiency measures that can be taken within the state. The state has no specific goal for improving efficiency within state government buildings. The state has adopted both the IEC and ASHRAE 90.1 codes but has no implementation or jurisdiction enforcement. The State has a residential and business energy conservation tax credit - for residential investments beyond code, consumers can get a credit of 25% of the investment up to $500. The business credit is 5% of the investment up to $300.
Recommendations: Work with the Environmental Quality Council on thorough evaluation of options for improving building energy codes and other efficiency practices in the state. The Council evaluation report is due to the 2005 legislature. The state can improve both its residential and commercial building codes prior to the next national update. For residential buildings, set the window efficiency value at 0.35 (U-value). Also, add requirements for high efficiency lighting fixtures and bulbs to the state residential code. For commercial buildings, increase the efficiency for mechanical equipment from the Consortium for Energy Efficiency Tier 1 standard to the Tier 2 standard. Establish a commercial building commissioning requirement that ensures all the systems in the building are working as they were designed. At a minimum, establish an energy code enforcement system to ensure the codes are achieving their objective.
Government should lead by example. Reduce energy use in government buildings by 20% over the next decade.
Expand the tax credit to encourage investments more aggressively in technologies and practices that go beyond codes and standards. Establish tiered credits to encourage consumers to utilize the most energy efficient design practices and technologies.
Increase Incentives for Renewable Generation
Current Status: Net metering requires only NorthWestern Energy and Montana-Dakota Utility to offer net metering to their customers for systems below 50 kilowatts. Montana offers a variety of tax incentives for residential and commercial distributed generation systems.
Recommendations: Expand net metering law to include all co-operatives and municipal utilities and increase capacity cap from 50 kW to 250 kW for certain applications.
Ensure that utility resource procurement planning includes valuation of the benefits of distributed renewable generation and demand-side management measures to reduce limitations on the local distribution system.
Improve Low Income Energy Services
Current Status: All Montana utilities offer weatherization services to low income customers, yet few programs have upgraded measures and practices, and delivery mechanisms. NorthWestern Energy has a 15 percent rate discount to customers that also receive federal LIHEAP. No other utilities have energy bill assistance programs.
Recommendation: Work with the Public Service Commission to allow utility programs to incorporate current state-of-the-art practices and comprehensive delivery approaches. These include use of base load efficiency and indoor air quality measures, adoption of best practices where practical, link to distributed renewables when appropriate, and use of new diagnostic tools. Establish a statewide requirement to offer some form of energy bill assistance to eligible customers.