Montana PSC defers rate decision on MDU RICE units

The Montana Public Service Commission (PSC) has approved a 13.3% rate increase for customers of MDU Resources (NYSE:MDU) subsidiary Montana-Dakota Utilities that will be phased in over two years.

The original application, filed by MDU with the Commission last June, proposed a 21.1% electricity rate increase, the PSC noted March 25. The order approves an electricity rate settlement between Montana-Dakota Utilities, the Montana Consumer Counsel and the Large Customer Group.

In addition, the PSC has deferred action for now on the question of rate recovery for two reciprocating internal combustion engine (RICE) units that have been installed at MDU’s Lewis & Clark power station.

The units can generate about 18 MW of power. “The Commission determines that the 2013 Integrated Resource Plan (IRP), does not, in fact, appear to support the construction of those units,” the PSC said in its March 25 order.

“The Commission further finds that MDU’s load growth forecast has declined substantially since that IRP was filed,” the PSC goes on to say.

“At hearing, when asked why units providing no economic energy and no capacity should nonetheless be included in rates, MDU witness Darcy Neigum argued that they were necessary to serve a load pocket in a transmission-constrained area of the oil patch,” the PSC said in the order.

“The Commission finds that the documents contain only cursory statements describing the problem, and by themselves, do not justify the addition of a particular plant at a particular cost,” the PSC said.

“The Commission finds MDU did not adequately explain its slow progress in acquiring cost-effective demand-side capacity resources that may have deferred or substituted for the RICE units… The Commission is not persuaded that MDU could not have acquired additional cost effective demand-side capacity that would have displaced or deferred MDU’s projected need for the RICE units,” the PSC held.

So the PSC is leaving the decision to include the units in rates for a future rate proceeding.

Additionally, the PSC clarified its position on environmental upgrades, noting that utilities should not charge customers for pollution control technologies until emissions standards are actually in effect and enforceable. The company has paid for upgrades to the Lewis & Clark Station in Sidney, Mont., and the Big Stone Plant in South Dakota.

“Customers should pay only for power plants that are actually used and useful in providing utility service. If a plant isn’t providing value to customers, then customers should not be paying for it,” said Travis Kavulla, R-Great Falls, in a news release from the PSC.

“The Commission sympathizes with the utility’s exposure to environmental regulations that the Commission believes are unjustified,” the PSC said in its order. “However, MDU has conceded that the return authorized by a regulatory commission for a utility that owns coal assets is, in part, compensation for the risks of owning and operating those plants. The Commission finds that environmental regulation is one such risk.”

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.