Butte, Mont.
NorthWestern Energy, which provides natural gas to nearly 160,000 residential and commercial customers in Montana, has filed suit in Lewis and Clark County District Court seeking to overturn the Montana Public Service Commission’s (PSC) decision to disallow the recovery of more than $6 million in actual gas costs.
The company took the issue to court after the PSC rejected the company’s Motion for Reconsideration last week. The company contends in its court filing that the majority of Commissioners violated NorthWestern Energy’s procedural rights and rights of due process when they voted to disallow a substantial portion of the company’s actual gas costs from the 2002/2003 heating season.
The complaint states that the Commis-sion majority acted arbitrarily and capriciously when it failed to follow the evidence in the record, and ignored the advice of PSC staff and the Montana Consumer Counsel in favor of a hypothetical gas cost. The merit (or lack of merit) of the hypothetical gas cost was never tested through examination of witnesses, because the assertions were not presented during pre-filed testimony or at the public hearing.
Additionally, the complaint states that the PSC ignored its previous orders and practices regarding other companies when it decided that NorthWestern Energy had acted imprudently by relying on Market Index prices for natural gas. Specifically, the PSC routinely authorizes other gas utilities (including MDU and Energy West) to purchase gas supply exclusively at Index.
NorthWestern Energy had no way of knowing that the PSC would not allow the company to do the same, according to the company. In fact, there is no dispute over the validity of the expenses nor
that they were actually incurred, and there is no evidence or testimony that suggests NorthWestern’s reliance on Market Index contracts were imprudent, NorthWestern contends.
Also, the PSC applied portions of its newly adopted electric default supply procurement rules as a standard in this natural gas matter. These electric rules, which had no application, were nonetheless applied retroactively and inappropriately to the gas proceeding as part of the PSC’s justification in its Order, according to the complaint.
On July 3, the PSC, on a 3-2 vote, issued a final order concluding that the company acted imprudently when it secured gas supplies because the majority felt the company should have obtained fixed-price supply contracts for a portion of its gas supply instead of relying exclusively on indexed-price supply contracts. Separately, the PSC followed its imprudence approach and extended this adjustment to the 2003/2004-tracker period in the interim order, which it issued the same day.
The effect of the order, which North-Western Energy is asking the Court to review, is to deny NorthWestern Energy approximately $6 million in revenue for actual gas costs it expended in tracker year 2002/2003. The effect of the Order as for the 2003/2004-tracker year will depend upon actual gas prices incurred through the current tracker year.
In addition to filing the complaint in District Court, the company reiterated its call for the commissioners and staff to begin a dialogue that would lead to a collaborative process to reduce the ongoing uncertainty over supply issues. “We are ready to begin immediately on the development of new guidelines for gas purchases,” said Dennis Lopach, senior vice president of administrative services. “We want the rules to be clear, applied consistently to all utilities in Montana and we want our actions to be judged against those rules. We hope that a process can be put in place that is understandable and is beneficial to all constituencies.”
NorthWestern Energy, a division of NorthWestern Corp. (NYSE: NOR), is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving approximately 598,000 customers in Montana, South Dakota and Nebraska.
