Montana PSC approves contract for 25-MW Greycliff wind project

The Montana Public Service Commission recently voted 4-to-1 to establish contract terms and conditions between Greycliff Wind Prime LLC. and NorthWestern Energy (NYSE:NWE) for a 25-MW wind project in southcentral Montana.

The PSC announced the development in a July 19 news release. The PSC ended up approving a power price of $45.49/MWh although Greycliff argues that the project “is not viable” at $45.49/MWh.

In July 2015 Greycliff Wind Prime LLC. and NorthWestern Energy had entered into negotiations to establish contract terms for the project amongst themselves, but were unable to reach an agreement, eventually requiring PSC mediation.

Central to the dispute between NorthWestern Energy and Greycliff was the price that NorthWestern’s customers would pay for the electricity produced by Greycliff. The PSC approved a rate based upon calculation of the utility’s avoided cost.

Greycliff sought to be compensated at a price of $53.39 per megawatt-hour (MWh) of electricity produced, NorthWestern Energy proposed a price of $35.65/MWh. The discrepancy between the proposed purchase prices required mediation by the Montana PSC.

The Greycliff Wind Farm will move forward as a qualifying facility (QF) under the federal Public Utilities Regulatory Policies Act (PURPA), a law which requires utilities like Northwestern Energy to purchase power from independent renewable generators less than 80-megawatts in size, at the utility’s “avoided cost.” Avoided cost is the cost the utility would have incurred had it supplied the same amount of power itself, or obtained it from another source.

The two primary points of dispute resolved by the PSC are:

  • The project will move forward with a contract length of up to 25 years at $45.49/MWh for the full length of the contract.
  • NorthWestern has the right to curtail purchase of Greycliff’s power during light load hours ONLY for safety purposes. NorthWestern had requested curtailment rights for economic reasons in addition to safety, but that request has been denied.

“Unfortunately, in every QF docket, the Commission is faced with trying to make sense out of federal policies that make no sense,” said Commissioner Roger Koopman, R-Bozeman.

Koopman said that if QF developers “are going to insist on fixed, long-term power purchase agreements, then the Commission must strive to make its first priority the protection of the consumer, by avoiding rates that appear to be insupportably high,” Koopman said. “Hopefully in our actions today, we struck a good balance that was fair to these dedicated wind entrepreneurs, while putting the legitimate interests of ratepayers first,” Koopman added.

Commissioner Bob Lake, R-Hamilton said he was disappointed with the “high price” that was approved, but federal law “limited the amount of discretion the Commission could use in setting the price consumers pay for this wind power, and we had very little authority to include additional benefits for consumers that we felt were necessary.”

Commissioner Kirk Bushman, R-Billings, dissented, saying it would hurt ratepayers for years to come.

 

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.