NorthWestern Energy seeks to buy more of Colstrip coal plant in Montana

HELENA – NorthWestern Energy said Tuesday it will seek regulatory permission to acquire part of Puget Sound Energy’s share of the Colstrip (Mont.) power plant for $1 as some utilities look to unload their coal-generated power.

The agreement would involve taking over the Washington state utility’s 25% ownership interest in Colstrip’s Unit 4 and also purchasing an interest in the separate Colstrip transmission system for as much as $3.75 million.

That would boost South Dakota-based NorthWestern’s ownership interest in the power plant to 55% amid questions about the plant’s future.

Customers’ bills are not expected to increase, in part because NorthWestern will not have to buy as much higher-cost power on the open market during peak usage, officials said.

“Even with projected operating and maintenance costs factored in, purchasing more of Colstrip Unit 4 for only $1 is by far the most affordable way to help close the gap in the capacity shortage facing our customers,” John Hines, NorthWestern Energy vice president of supply, said in a statement.

NorthWestern purchased its 30% share of Colstrip 4 in 2008 for $187 million and received permission from the Montana Public Service Commission to charge ratepayers $407 million over 34 years.

Two of Colstrip’s four units are scheduled to be shut down in the coming months as part of a legal settlement. Six companies own shares of the plant’s two newer units, and four of those companies are making preparations for operations to cease as early as 2025.

Under Washington state law, Puget Sound Energy and another partial owner, Spokane-based Avista Corp., must stop using coal power by the end of 2025. PSE also owns 25% of Unit 3 and Avista owns 15% each of Units 3 and 4.

NorthWestern, however, plans for the plant to continue operating past 2040.

NorthWestern said it will seek pre-approval from the Montana Public Service Commission early next year to acquire 185 megawatts of coal-fired power generation capacity. It will also seek approval to sell 90 megawatts of that production to Puget Sound Energy for five years.

After the five years end, NorthWestern would have the option of purchasing another 90 megawatts of capacity on the transmission line, officials said.

During the 2019 Legislature, NorthWestern sought lawmakers permission to purchase an additional share of Colstrip from an unnamed company for $1 with the authorization to buy additional capacity on the power line for market price.

The bill was rejected amid complaints that it would have sidestepped the Montana Public Service Commission’s ability to regulate the spending and costs that would be passed on to customers.

“We took that feedback and this is a better proposal than what was proposed during the Legislature,” spokeswoman Jo Dee Black said Tuesday.

If NorthWestern had the additional 95 megawatts of power from Colstrip Unit 4 available last winter, its customers would have saved $4 million over a four-day March cold snap during which the utility had to buy power on the spot market, Hines said. With the full 185 megawatts, customers would have saved $8 million over that four-day stretch, he said.

NorthWestern Energy is still looking to make up for another estimated 400-megawatt capacity shortage by issuing requests for proposal for other power generation.

The company cannot comment on whether it is interested in purchasing more shares in the coal-fired plant unless a transaction is announced, Black said.

The utility will set aside about $5 million in profit from selling power to Puget Sound Energy for environmental remediation and decommissioning costs when Unit 4 is retired, officials said.