NorthWestern CEO: BPA will determine fate of MSTI

NorthWestern Energy (NYSE:NWE) may abandon the Mountain States Transmission Intertie (MSTI) project if the Bonneville Power Administration (BPA) chooses another alternative to serve its customers, CEO Robert Rowe said during the company’s 2Q12 earnings call July 24.

In addition to MSTI, BPA is considering “several” options, including the Boardman-to-Hemingway project proposed by Idaho Power and PacifiCorp, to move power to loads in southeast Idaho, a BPA spokesperson told TransmissionHub July 25. BPA is bound by a non-disclosure agreement and was limited in what it can divulge.

BPA signed memoranda of understanding with NorthWestern and Idaho Power and PacifiCorp on Jan. 11 and Jan. 12, respectively. BPA’s interest in MSTI was precipitated by PacifiCorp’s termination of a contract under which BPA served its customers in southeast Idaho. The contract expires in 2016.

BPA’s decision is the next key step in determining MSTI’s fate. The BPA will conclude its studies by July 31, hold a public meeting and comment period in August, and will develop a “list of prioritizations” in the fall, the BPA spokesperson said. 

“After that prioritization, which will be made in September, we’ll have a better sense of the partnership possibilities with NorthWestern,” the BPA spokesperson said. “BPA will definitely select more than one option for continued exploration, if only because we would not want to put all of our eggs into one basket,” she added.

“If BPA decides to move ahead with MSTI, that would be sufficient to ensure the project’s viability,” Rowe said. “If we determine an agreement with BPA is unlikely or can’t be completed on a timely basis, we may abandon the project. If we abandon our efforts to pursue MSTI, we’ll write off expenses, which could have a material adverse effect on our results of our operations.”

As of June 30, Northwestern had capitalized $23.5m of preliminary survey and investigative costs associated with the MSTI project. The company is evaluating options concerning the possible write-down but noted that retail customers in Montana will not be charged.

The BPA spokesperson said that using the word “decision” with respect to this process “is not necessarily the best word because it’s just a list of prioritizations.” 

MSTI is a 430-mile line, 500-kV transmission line estimated to cost $1bn, according to TransmissionHub data.

Progress made, but ‘goal post seems to keep receding’

MSTI has encountered multiple delays, the most recent issuing from the Idaho Bureau of Land Management’s (BLM) requirement that transmission projects in the state evaluate alternate routes in order to accommodate environmental considerations for the sage grouse’s habitat. The requirement will delay the draft environmental impact statement (DEIS), conducted by the Montana Department of Environmental Quality (DEQ), for the project by six to nine months, Rowe said.

“This delay in the timeline will result in increased costs and delay the construction timeline, potentially significantly,” Rowe said. He noted that the Idaho BLM and the Montana DEQ have not provided the company with a fully updated schedule.

Based on these developments, Northwestern estimates an in-service date of late 2018 at the earliest, Rowe said. The company previously expected the line to enter service in 2017, according to TransmissionHub data.

“We continue to make tremendous progress on multiple fronts with MSTI but the goal post seems to keep receding,” Rowe said.

The delay will also affect the project’s ability to be available for market participants and creates further uncertainty for market participants who are reliant on tax credits as part of their own development strategies, Rowe added.

“Due to the lack of clarity around key market participants and permitting issues, we had indefinitely extended the open season process for MSTI,” Rowe said. “If BPA decides to pursue an option other than MSTI, then we’d have to evaluate the project in terms of the significant ongoing monthly expenditures coupled with the delay and the effects that the delay would have on the market for the project.”

MSTI’s travails are not unlike those that other transmission developers are experiencing in the region, given uncertainty surrounding continued production tax credits for wind projects and the state of the economy, a spokesperson for NorthWestern told TransmissionHub July 25. She also noted that the Idaho BLM’s decision has affected all of the transmission companies in Idaho.

“We’re all similarly impacted by the studies BLM believes need to be done to adequately address sage grouse habitat,” the spokesperson said.

MSTI impact on collector system project

In order to connect wind power into the grid, a collector system would connect wind export lines with the wind farms.

“There are areas that we know have a very high level of interest among developers, so the collector would be a series of lines up to five, depending on how the industry would build out, and would be built into those areas to gather the wind power coming in from those new developers into the system for delivery on MSTI,” the spokesperson said.

Though there has been interest, “nothing is currently planned,” the spokesperson said.

The relationship between the collector system and MSTI presents a bit of a chicken-and-egg conundrum, Rowe acknowledged.

The collector system “really depends on MSTI” and on the further development of resources in Montana, Rowe said. “But on [the] large scale a collector system would normally be conceived, to build a collector you require MSTI; [if] MSTI is built, it will be in response to demand of some sort and depending on what the demand looks like, that would support the collector,” he said.

Idaho Power is a subsidiary of IDACORP (NYSE:IDA). 

Carl Dombek contributed reporting to this article. 

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.