January 2024 cold snap to cost NorthWestern customers $39M

Electricity pylons (Photo by Getty Images).

NorthWestern Energy customers will pay an estimated $39 million more for power during the cold snap in January, and shareholders will pay some $4 million extra, the company said Wednesday and in a February memo.

In a presentation to the Montana Public Service Commission, NorthWestern Energy officials argued the cold snap shows the utility needs to be able to generate more of its own energy. They pointed to the controversial Yellowstone Generating Station in Laurel, a natural gas-fired plant, as a critical solution.

“The key piece here from a NorthWestern perspective, is that we have to have sufficient generation … for our system,” said John Hines, vice president of supply for NorthWestern Energy.

(Screenshot from NorthWestern Energy presentation to PSC in March 2024.)

A letter from the monopoly utility to the PSC about how NorthWestern handled the cold snap said customers would have saved $32 million of the roughly $40 million spent on power purchases had the Laurel plant and additional megawatts from Colstrip’s coal-fired plant already been available.

Critics of the under-construction Laurel plant have said NorthWestern Energy is relying too heavily on fossil fuels and ignoring costs related to climate change, including health impacts from bad air. They also argue NorthWestern should take a closer look at renewable resources as a more affordable approach for the future.

At the meeting Wednesday, though, Hines said solar and wind provided little output during the frigid period in January. NorthWestern said it experienced “its highest ever sustained load” over a six-day period, and employees worked under extraordinary conditions to keep the lights on.

“(Jeremy Clotfelter, director of hydro operations) had a tremendous number of his people out at the dams in minus 40, 45 degree weather outside with picks and probes knocking ice away from the intake gates during lots of hours,” Hines said.

NorthWestern operates dams in the state, and roughly 32% of power for Montana customers comes from hydroelectric facilities, according to the company.

But the record temps — as low as -45 in at least a couple of places — prompted questions about risks to Montana customers when it comes to power supply. After the snap, the Public Service Commission asked NorthWestern to address how its system operated from roughly Jan. 8 to 18 when temperatures dipped below freezing for days in parts of the state.

At the meeting this week, Public Service Commission President James Brown said public criticisms include allegations NorthWestern did not properly plan for the cold weather by scheduling maintenance, and he asked for a response.

Hines disagreed: “I would say that perception is incorrect.”

Energy analysts had earlier pointed out that Colstrip wasn’t running at full capacity for most of the week before the Arctic blast, and they also said technology exists for utilities to store wind energy and use it later, but NorthWestern doesn’t do so.

In response to Brown, Hines explained the reason Colstrip was down prior to the cold snap. He and another NorthWestern official also stressed the need for the new natural gas plant, expected to be running by the third quarter of this year, and more megawatts at Colstrip to come online, to take place in January 2026.

The plant is estimated to cost $310-320 million, and NorthWestern will ask the Montana Public Service Commission to pass that cost onto customers in the future. Recently, more than 40 businesses and organizations asked the PSC to take climate into consideration in their decisions; a PSC spokesperson said Thursday the petition is still pending.

Next Tuesday, March 12, the PSC is scheduled to take up NorthWestern Energy’s plan to meet electricity requirements in Montana in a cost-effective way over the long term. A PSC staff memo and draft order described the plan as “deficient in several important respects,” full of errors, lacking transparency, and falling short in public engagement.

“The public has a substantial interest in NorthWestern’s integrated resource planning and the resource acquisitions that follow,” said the staff memo. “Resource decisions can have significant impacts on customer bills that last for decades.

“The public is therefore entitled to information regarding NorthWestern’s resource planning.”

This week regarding Colstrip, Hines said a pinhole leak was identified November 2023 in a tube that runs to a boiler. One month later, a couple more tiny leaks were identified, and in early January 2024, the holes became bigger, he said.

Originally, he said, maintenance was scheduled for the same timeframe the cold weather ended up being forecast. When it became apparent the cold was coming, NorthWestern moved up the maintenance, and the repair work was more extensive than anticipated, he said.

He said the plant didn’t come back online until early morning the Friday of the snap, which was after temperatures had started dropping. However, it was running at full capacity by the end of the day, and Hines said it “ran through the rest of the cold weather event exceptionally well.”

Hines also said in the course of a year, NorthWestern Energy has excess energy available, but the timing of availability doesn’t always line up with need, such as during this year’s cold snap.

NorthWestern’s Joe Stimatz said the below-zero period lasted multiple days and hit the entire Northwest region, and “it was a stressful event for many, many utilities.” He also said the region has a slim capacity margin, which affects cost.

“The pricing that we saw in that market I think are indicative of the very, very tight margin between the total amount of generation that’s available and what the load was,” Stimatz said.

In response to a question from Commissioner Tony O’Donnell, Hines said some utilities in the region were one adverse event away from having rolling blackouts, although Stimatz said he believes all of the utilities made it through “without shedding load,” or using strategic reductions such as rolling blackouts.

Hines also said NERC, the North American Electric Reliability Corporation, is noting increasing concerns about reliability across the country and specifically in Montana. He said it’s partly due to “load growth,” but also because generation is “being retired without adequate replacement.”

Additionally, Hines said the cold snap led to speculation NorthWestern has “zero hedges associated with our portfolio.” He said hedging the market generally means insulating customers from reliability concerns or financial repercussions, which the utility does with its own generation and power purchase contracts.

However, he said the PSC authorized a specific type of hedging that allows NorthWestern to buy contracts one month ahead if the forecast shows less load than generation. But the forecast did not show a shortfall, “therefore use of that tool was not allowed,” a NorthWestern memo said.

“Load variability is very difficult to forecast very far in advance,” Hines said.

Generally, Hines said, NorthWestern’s own generation and purchase contracts met 52% of the need over the cold snap, long-term capacity purchases met 23%, and day-ahead, real-time purchases met 25% of the need.

“You’ve heard us say in the past that we don’t have a hedging problem, and I don’t think we do,” Hines said. “What I think we do have is a problem addressing this tremendous amount of intermittent generation in our portfolio.”

Last week, NorthWestern filed a request for a quarterly adjustment that includes the extra costs in January. The utility estimates residential electric customers will pay another $6.73 a month, or $111.87 a month compared to $105.14, a 6.4% increase for all adjustments in the quarter.

The post January 2024 cold snap to cost NorthWestern customers $39M appeared first on Daily Montanan.