By Ken Toole, President
Like a bad horror movie, the story of electric deregulation continues. In "Franken-Dereg: The Movie," deranged Montana Power executives dismembered the electric company and used the parts to build the monster, "Franken-Dereg." Of course, the monster turned on them and found a new master in Pennsylvania Power (PPL). After years of being terrorized by the Franken-Dereg monster, the good citizens finally stormed the castle in Helena, the legislature put an end the deregulation fiasco, and the people began rebuilding a stable and affordable electric system. The End.
Now the sequel, "Bride of Franken-Dereg" is in production. In this movie, Franken-Dereg is dying, being choked by cheap natural gas and increasing environmental costs. NorthWestern Energy falls prey to delusions of wealth and power. They want to build another monster. They hope to buy the remains of Franken-Dereg from Pennsylvania Power, which is now returning to its cave in Allentown, PA. Stay tuned...
Unfortunately, like many bad movies, this story reflects reality. Recently, PPL announced it is selling its deregulated Montana electric plants. They want to focus on their regulated utility business in Kentucky and Pennsylvania. Not surprising, since electric markets have tanked because of cheap natural gas and the declining cost of wind power. Moreover, PPL's coal plants are dirty and expensive, which is why utilities across the country are "retiring" coal plants. So PPL wants out. Who would want to get into this business at this time?
Well, duh, here we go again. It is likely that Northwestern will try to buy PPL's generators. There has been plenty of speculation about that among members of the media and in the halls of the Legislature. Of course PPL and NorthWestern refuse to comment, but the fact remains PPL is looking to sell a bunch of electric plants sitting in the middle of NorthWestern Energy's service territory.
First a little background. In 2007, the legislature passed HB 25. The goal was to get NorthWestern back to owing its own electric generators with rates based on the cost of producing energy. This was much better than rates determined by the speculative energy markets we had relied on because of deregulation. But, if NorthWestern buys all of PPL's generators, it will own much more generation than is needed to meet Montana needs. There's the rub. It will put NorthWestern in the business of speculative power marketing. That's risky for ratepayers.
If power markets are not providing a good price, NorthWestern will have to come up with the money somewhere (ahem, are you paying attention?). Sure, there will be a lot of legal gobbledygook about setting up "unregulated, functionally separated, ring-fenced, marketing subsidiaries," blah, blah, blah. But this unregulated subsidiary stuff is exactly what drove the old NorthWestern Energy into bankruptcy a number of years ago.
So, what would NorthWestern be buying from PPL? There are the dams on the rivers. It would be great if the company could get them at the right price. They are clean, reliable, and will last a long time. But then there are the coal plants. Coal plants are not cheap. NorthWestern's current share of Colstrip 4 is some of the most expensive power in its "portfolio." Even worse, these coal plants are not reliable. After all, these are old machines approaching the end of their life expectancy, and they tend to break down.
Coal plants are dirty. Obviously, they contribute to climate change. Even those who insist on ignoring the science and evidence of climate change should realize there are all kinds of other environmental costs associated with this kind of development. Those costs have to be picked up somewhere, as we have seen in Superfund sites across the state. The first people on the hook for those costs are the owners and, in a regulated utility like NorthWestern, those costs get passed through to ratepayers.
Much as I resent what PPL has done to our electric rates since 2002, I have to admit they are good business people. They rode deregulated electric markets through the biggest price spikes in history, making millions in the process. Now they want out as market prices are deflating. What is NorthWestern thinking?