The Federal Energy Regulatory Commission on May 21 approved NorthWestern Corp.’s planned buy of 11 Montana hydroelectric facilities from PPL Montana LLC.
On Jan. 10, NorthWestern and PPL Montana filed an application requesting authorization for the acquisition and disposition of jurisdictional facilities including 11 hydroelectric facilities from PPL Montana to NorthWestern.
NorthWestern is a public utility engaged in the generation, transmission, and distribution of natural gas through its Montana and South Dakota divisions. NorthWestern’s electric business is organized as two separate electric divisions, each of which owns generation, transmission, storage, and local distribution facilities.
NorthWestern currently owns generation in the form of 30% of the Colstrip Unit 4 coal-fired facility; the Spion Kop wind generation facility; and the David Gates Generating Station.
PPL Montana is an indirect, wholly owned merchant generation subsidiary of PPL Corp. (NYSE: PPL). PPL Montana owns and operates approximately 1,315 MW of generation in NorthWestern’s Montana balancing authority area.
NorthWestern has agreed to purchase from PPL Montana a portfolio of eleven hydroelectric facilities located in NorthWestern’s Montana balancing authority area, together with a storage reservoir and certain related facilities and the rights and liabilities associated with those facilities. The proposed transaction is structured as an asset purchase and sale that will result in NorthWestern’s purchase of these eleven plants: Thompson Falls; Kerr; Madison; Hauser; Holter; Black Eagle; Rainbow; Cochrane; Ryan; Morony; and Mystic, as well as a storage reservoir. Collectively, these facilities have a total summer capacity of 633 MW. The Confederated Salish and Kootenai Tribes of the Flathead Nation hold a purchase option for the Kerr plant exercisable beginning in 2015.
The applicants told FERC that the facilities being acquired by NorthWestern will not enable NorthWestern to exercise market power for several reasons.
- NorthWestern will continue to rely on purchased power during some of the highest peak load periods.
- The generation facilities acquired are operated as run-of-the-river hydroelectric generation, which means that the actual amount of energy and capacity available to NorthWestern will be less than their nominal summer rating of 633 MW.
- The proposed transaction reduces market concentration because a generation owner, PPL Montana, with a substantial amount of generation in the relevant geographic market, the NorthWestern Montana balancing authority area, is transferring some generation to a smaller generation owner, NorthWestern.
- The applicants explained that NorthWestern’s portfolio of generation assets, including coal-fired and wind-powered generation, as well as the run-of-the-river hydroelectric generation does not lend itself to a profitable withholding strategy.