RESIDENTIAL ELECTRICITY RATES OF NORTHWESTERN ENERGY

THROUGH JUNE 2017

Prepared By: Jason T. Brown

Montana Consumer Counsel P.O. Box 201703 (406) 444-9698

jbrown4@mt.gov

Introduction

The following graphs show residential electricity rates, sources of

electricity, and selected unit prices of NorthWestern Energy

(“NorthWestern”). This information is available in published tariffs

and various dockets at the Montana Public Service Commission.

Since 1998, consumers of electricity services from NorthWestern or its

predecessor have paid three primary electricity rates: (1) a Distribution

Delivery Service Rate (“Distribution”); (2) a Transmission Delivery

Service Rate (“Transmission”); and (3) electricity supply rates. The

Transmission and Distribution rates pay for the wires and poles that

transmit electricity. The supply rates pay for the electricity itself.

These volumetric rates are charged in addition to a flat customer

charge, currently $4.10 per month.

NorthWestern has purchased significant quantities of electricity from

PPL Montana, now Talen Energy (“PPL”), as well as a 135-megawatt

(“MW”) wind farm in Wheatland County (“Judith Gap”).

NorthWestern makes daily market purchases and sales through the

Mid-Columbia trading hub and reports the sum of these offsetting

transactions (“Spot Market”). It also has numerous contracts with

Qualifying Facilities, whose thermal and renewable power it is

required to purchase at rates not exceeding its “avoided cost.”1 These

include contracts signed by NorthWestern since 2006 (“QF-1”) and

the Montana Power Company prior to 1996 (“QF II”).2

1 See 18 C.F.R. § 292.303 (2017). 2 NorthWestern also collects QF II costs a separate QF-CTC rate, which is included on the graphs.

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In recent years, NorthWestern has acquired its own power plants to

generate an increasing share of its electricity. In 2009, it rate-based its

222-MW share of the Colstrip Generating Station in Rosebud County

(“Colstrip”). In 2011, it commissioned a 150-MW natural gas plant in

Deer Lodge County to provide grid regulation and wind integration

services (“Dave Gates”). In 2012, it acquired a 40-MW wind farm in

Judith Basin County (“Spion Kop”). In November 2014, it purchased

a number of large hydroelectric facilities from PPL, which currently

provide about 440 MW of power (“Hydros”).

In 1997, the Montana Legislature mandated a “Universal System

Benefits” charge, which annually collects 2.4% of NorthWestern’s 1995

retail sales revenue to ensure continued funding of low-income,

conservation and renewable energy programs (“USB”). Since 2004,

NorthWestern has also administered “demand-side management”

programs to promote cost-effective conservation and efficiency efforts

(“DSM”). By reducing the amount of electricity sold, these efforts may

reduce certain revenues, which NorthWestern was allowed to calculate

and collect from 2006 through 2015 (“Lost Revenues”).

The Bonneville Power Administration shares the benefits of low-cost

federal hydropower with NorthWestern’s ratepayers through a

residential credit mandated by Congress (“BPA Credit”).3

NorthWestern’s supply rates also include administrative, transmission

and carrying costs, as well as other purchases, adjustments and charges

(“Other”).

3 See Portland Gen. Elec. Co. v. BPA, 501 F.3d 1009, 1014 (9th Cir. 2007).

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$(10)

$-

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

Infl

atio

n-A

dju

sted

$/M

Wh

NorthWestern Residential Electricity RatesOther

Spot Market

QF II

PPL

Lost Revenue

DSM

Judith Gap

QF-1

Colstrip

Dave Gates

Spion Kop

Hydros

USB

Transmission

Distribution

BPA Credit

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NorthWestern Residential Electricity Rates

Distribution26%

Transmission8%

USB1.2%

Hydros19%

Spion Kop1.2%

Dave Gates5%

Colstrip13%

QF-11.7%

Judith Gap2.2%

DSM0.9%

Lost Revenue

1.0%

PPL1.0%

QF II8%

Spot Market3%

Other9%

2015-2016

Distribution27%

Transmission8%

USB1.2%

Hydros21%

Spion Kop1.1%

Dave Gates5%

Colstrip13%

QF-12.0%

Judith Gap2.0%

DSM0.9%

PPL1.0% QF II

8%

Spot Market1.5%

Other9%

2016-2017

Distribution25%

Transmission8%

USB1.2%

Hydros11%

Spion Kop1.3%

Dave Gates6%

Colstrip13%

QF-11.7%

Judith Gap2.0%

DSM0.8%

Lost Revenue1.8%

PPL1.0%

QF II8%

Spot Market3% Other

16%

2014-2015

Distribution27%

Transmission9%

USB1.3%

Spion Kop1.1%

Dave Gates6%

Colstrip13%

QF-11.2%

Judith Gap2.2%

DSM0.8%

Lost Revenue1.6%

PPL13%

QF II7%

Spot Market6%

Other11%

2013-2014

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0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

550,000

600,000

650,000

700,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

MW

h

NorthWestern Electricity Supply

USB & DSM

Other

Spot Market

QF II

PPL

Judith Gap

QF-1

Colstrip

Dave Gates

Spion Kop

Hydros

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NorthWestern Electricity Supply

Hydros37%

Spion Kop2.0%

Dave Gates0.9%

Colstrip18%

QF-13.5%

Judith Gap7%

PPL1.8%

QF II12%

Spot Market6%

Other11%

2016-2017

Hydros36%

Spion Kop2.0%

Dave Gates0.9%

Colstrip21%

QF-12.7%

Judith Gap7%

PPL1.8%

QF II13%

Spot Market15%

Other-0.9% 2015-2016

Hydros39%

Spion Kop1.9%

Dave Gates0.9%

Colstrip24%

QF-12.8%

Judith Gap7%

PPL1.8% QF II

13%

Spot Market9%

Other0.5%2014-2015 Spion Kop

2.1%Dave Gates

0.9%

Colstrip16%

QF-12.3%

Judith Gap7%

PPL24%QF II

11%

Spot Market16%

Other21%

2013-2014

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Selected NorthWestern Electricity Unit Prices

Spot Market$24.08

Judith Gap$30.64

PPL$54.03

Spion Kop$55.93

Hydros$58.17

QF-1$60.22

QF II$70.92

Colstrip$73.85

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00 2016-2017

Spot Market$21.74

Judith Gap$30.51

PPL$54.03

Hydros$54.38

Spion Kop$59.16

QF-1$64.13

Colstrip$64.26

QF II$68.47

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00 2015-2016

Hydros$30.07

Judith Gap$30.75

Spot Market$31.82

PPL$54.03

Colstrip$56.98

QF-1$61.90

Spion Kop$66.57

QF II$69.27

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00 2014-2015

Judith Gap$30.30

Spot Market$37.54

QF-1$52.50

Spion Kop$53.13

PPL$52.96

QF II$71.88

Colstrip$82.55

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00 2013-2014

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$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$/M

Wh

Colstrip Unit Price

→ Rate-based

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$/M

Wh

Hydros Unit Price

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$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$/M

Wh

Judith Gap & Spion Kop Unit Prices

Integration purchased ←(included in price)

→ Integration from Dave Gates

(not included in price)

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$/M

Wh

PPL Unit Price

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$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$/M

Wh

QF Unit Prices

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$/M

Wh

Spot Market Unit Price

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