A fundamental American economic principle is that consumers do better when companies compete for our business. When corporations grow large enough to squeeze out competitors and become monopolies, we lose.
Consumers pay more for goods and services, innovation is stifled, and communities become hollowed out as local businesses are shuttered. When monopolies emerge, market abuses run rampant, and everyday people get the shaft.
As the saying goes, “absolute power corrupts absolutely.” This is why we have laws against corporate monopolies. Except when we don’t …
NorthWestern Energy has been granted the immense privilege of being a legally-sanctioned monopoly in Montana. Sadly, the investor-owned corporation has abused this privilege time and again by building or purchasing the most expensive energy sources possible. Why? Because our government-sanctioned monopoly structure rewards overspending.
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By law, NorthWestern can ask the Public Service Commission (PSC) to grant it a “return on equity” for facilities it builds, owns, operates, and maintains. The PSC is supposed to balance the interests of consumers when evaluating these requests, but it usually grants NorthWestern a handsome return without much quibbling. The result is ever higher energy bills that make it harder for Montana’s hardworking families to thrive.
So, exactly how does this “return on equity” abuse play out?
Essentially, “return on equity” is the PSC approving guaranteed profit margins for NorthWestern. The “return” is captured as a percentage of the total cost NorthWestern spends on building, maintaining, and operating its electricity generation facilities. The return (profit margin) requested in NorthWestern’s new rate hike this year is 10.8%. Pretty sweet deal for a monopoly with no competitors.
So, the more expensive the facility, the more profit NorthWestern’s shareholders make. Let’s consider a 175-megawatt facility, like NorthWestern’s methane-fired plant in Laurel. Would corporate shareholders rather have 11% returns for an efficient $150 million solar plant or 11% returns associated with the $320 million methane-fired plant NorthWestern built? The solar plant would result in much lower energy bills for consumers, but the expensive methane-fired plant creates more profit for NorthWestern. We see which choice the monopoly corporation made.
NorthWestern’s excuse for saddling us with these expensive, polluting plants is that they are more reliable when “the sun doesn’t shine or the wind doesn’t blow.” This is a false, dated argument that doesn’t hold water. Advanced battery technology allows renewable energy to be stored and reliably deployed when needed. This is why solar and wind are the fastest growing energy sources in the U.S. despite NorthWestern’s refusal to build these facilities in Montana.
In fact, expert research shows that methane-fired plants are more vulnerable to failures during frigid cold months when energy demand is highest in Montana. Equipment freezing can lead to failures in valves, water lines, and other gas infrastructure. In one of the most extreme winter storms of 2022, methane-fired plants accounted for a whopping 63% of the generation facilities forced offline. Doesn’t sound reliable to me.
And, laughably, NorthWestern is using the same “reliability” argument for its acquisition of a larger ownership stake in the ancient Colstrip Power Plant, built in the mid-1980s. The plant has been notoriously unreliable, going offline during this summer’s biggest heat wave. Keeping the plant limping along will require massive maintenance costs, including $200 million (or more) to stay in legal compliance with modern plant standards.
Would either of those risky, expensive “investments” pass muster in a free market if NorthWestern had to earn its profits the hard way by competing with other businesses? That’s unimaginable. But the corporation will keep abusing its monopoly status — and ratepayers — unless the PSC does its job.
NorthWestern’s latest rate hike request for these overpriced plants comes immediately after its historic 28% rate increase last year. The audacity is stunning. But, again, “absolute power corrupts absolutely.”
Let’s all contact the PSC at 1-800-646-6150 or pschelp@mt.gov. Tell commissioners to deny NorthWestern’s latest rate hike. This monopoly abuse has got to stop.
Edward Barta is a Billings resident, NorthWestern Energy ratepayer, and chair of Northern Plains Resource Council, a grassroots conservation and family agriculture organization.
