- A Montana district court judge has ruled to uphold an order from the state Public Service Commission (PSC) to deny NorthWestern Energy a proposed rate increase to recover lost revenues, the AP reports.
- Northwestern sought the rate increase to recover the costs of unexpected outages and lost revenues due to energy efficiency programs. The judge found the PSC rejected the rate hike "based on substantive evidence and by doing so ensured reasonable and just rates," according to the AP.
- Northwestern indicated to the AP they will now consider an appeal to the state Supreme Court.
Although the case centers around a relatively small rate hike in Montana, this story is window into the challenges facing electric utilities across the U.S. as shrinking load growth exposes the failings of the traditional revenue model in the 21st century. Load growth is no longer a guarantee for the utility industry, and thus a business model built on electricity sales is no longer feasible.
While some states have decoupled sales from revenue and provide incentives to offset the lost sales, many experts still argue this is not enough to fully remove barriers and disincentives to greater energy efficiency.
A report from the Institute for Electric Innovation, a research group associated with the trade group for investor-owned utilities, suggests three key regulatory mechanisms hold the key to fully aligning the utility business model with energy efficiency: direct cost recovery, fixed cost recovery (through decoupling and lost revenue adjustment mechanisms), and performance incentives.
A review of the 50 states' policies at the end of 2014 revealed that Montana has lost revenue adjustment mechanisms and performance incentives, but is not decoupled. According to the report, the PSC granted Northwestern Energy a decoupling mechanism in 2010, which the utility asked the PSC to reconsider, thus "leaving the docket open and the implementation of decoupling pending further action."