The Montana Environmental Information Center, or MEIC, on Friday urged the Federal Energy Regulatory Commission to reject a 370-MW power purchase agreement between NorthWestern Colstrip and Mercuria Energy America, a power marketing and trading company.
The issue centers on the changing ownership of the 1,480-MW coal-fired Colstrip power plant in Montana and concerns that NorthWestern Energy retail customers would be forced to subsidize the cost of service under the PPA.
Puget Sound Energy is set to transfer its 370-MW stake on Jan. 1 to NorthWestern Energy for zero dollars. Separately, NorthWestern is also acquiring Avista’s 222-MW stake in the power plant at no cost on the same day.
When the deals are closed, NorthWestern will own 70% of the Colstrip power plant, NorthWestern Energy Group said in an Oct. 30 filing with the U.S. Securities and Exchange Commission.
NorthWestern expects it will be able to use the PSE stake in the plant to sell power to future large load customers, but in the meantime has entered into the Mercuria PPA, the company said in the filing.
NorthWestern said it expects the Mercuria PPA will “largely offset” the roughly $30 million in annual operating and maintenance costs related to owning the PSE capacity. The PPA is set to run from Jan. 1 to Sept. 30, 2027, according to NorthWestern Colstrip’s application at FERC.
However, MEIC contends that the application is flawed in two ways.
First, NorthWestern failed to get FERC’s approval for its acquisition of PSE’s stake in the power plant, according to the advocacy group. The Federal Power Act’s section 203 requires FERC approval of transactions, such as buying and selling power plants, that are valued at more than $10 million, MEIC said.
Although NorthWestern is acquiring PSE’s stake in the power for zero dollars, the capacity is worth at least $10 million, according to MEIC. NorthernWestern, for example, expects to reap roughly $30 million a year in revenue under its Mercuria PPA, the group said.
Second, NorthWestern failed to show that its utility customers wouldn’t inappropriately cross-subsidize NorthWestern Colstrip, according to MEIC.
“The below-cost rate NorthWestern Colstrip proposes to charge Mercuria raises an acute concern that NorthWestern Energy’s retail customers will subsidize the cost of service for the wholesale affiliate,” MEIC said.
Also, the Mercuria PPA risks cross-subsidization of NorthWestern Colstrip’s transmission costs by NorthWestern Energy’s retail customers, the group said.
