Letter to Legislators: – Koopman
Warm greetings, Representative .
Thank you for allowing me to share a few critically important and objective facts concerning HB 284, aka, The Blackmail Bill.
I do not use the term blackmail loosely. I chose it very carefully. For indeed, if I were still sitting in one of my old seats on the House floor right now, I would be deeply offended over the false narrative being spun by certain Montana utilities in their attempt to resurrect acquisition preapproval from the graveyard of policy disasters (an ancient relic from Montana Power deregulation days.) You have been threatened. You have been fear-mongered. You have been lied to and dishonored. That should not sit well with you or with any of your fellow members – all of whom strive to base their votes on verifiable truth, not fiction. The utilities are replacing truth with fables and fiction.
You are being blackmailed into believing that unless you remove from these utility monopolies, all of the business risks and accountability associated with new projects and acquisitions — and shift all those risks onto the backs of ratepayers — there will be no new energy produced by these companies to meet Montana’s fast-growing energy needs. No gas plants. Not wind farms. No solar arrays. No new acquisitions. No added base load production. Lacking the total protection from business risk they want, these public utilities will pick up their marbles, sit back and do nothing. So they warn…
For at least two sessions now, the utility lobbyists have been telling the House Energy Committee that without locked-in preapproval, all of these generation projects would be “far too risky” for their monopoly companies to take on, despite having guaranteed markets, guaranteed customers and guaranteed profits. How plausible is that?? But wait. Those financial risks don’t suddenly disappear if we pass HB 284. So where to they land? Squarely on the ratepayer’s back, who has no control over any of this.
Listen carefully. NWE and MDU are saying that If the legislature doesn’t comply, then prepare for energy shortages, wild market prices, forced conservation, brown-outs and worse. Yes, even bankruptcy. Why? Because unless you give utilities the “free ride” they demand, they ain’t gonna buy and they ain’t gonna build. Too much “risk.” Montanans will be left in the lurch, and legislators will be responsible for the crisis.
If that’s not blackmail, I don’t know what is. And as with all blackmail, it’s based on calculated intimidation and calculated misrepresentation. You are being hoodwinked.
Many of the falsehoods are discussed in an accompanying attached document, provided earlier to the committee. Please take the time to read this. I am offering a perspective of 8 years of first-hand observation of preapproval in action, while serving as an open-minded member of the Montana Public Service Commission. Hysterical claims about “destabilizing markets”, “drying up capital investment”, “feeling the ravages of the energy marketplace”, “obstructing energy production,” etc., are very large red herrings, raised in the Northwest, and dragged across the trail of trusting legislators.
It is essential you know that there is absolutely no alignment between the reinstatement of preapproval (HB 284) and the amount of future energy produced in the state of Montana. Preapproval and energy supply are totally unrelated — the blackmailing attempts notwithstanding. There is also no relationship (asserted by some) between preapproval and the types of energy fuels and technologies that will be used in the future. (Some Republicans in particular have fallen for this false argument.)
Preapproval isn’t about any of this. Simply put, preapproval is about giving NWE and MDU grotesque, rate-increasing advantages by empowering them to buy over-priced major acquisitions at no risk. Utilities are given free reign over their consumers because, once preapproved, the PSC is powerless to do anything about imprudent projects and acquisitions. Their hands are tied through the designed purpose of preapproval itself — socializing risk while forcing evaluation of proposed projects when no economic and operational data are yet available. The PSC is in essence made to “fly blind,” relying on nothing more than the optimistic predictions, projections and forecasts of self-interested utility “experts.” Quite the set-up..
In HB 284, we end up substituting informed approval (through a traditional rate case) with uninformed preapproval. Because of how rate basing and return on equity works, the risk-protected utility monopoly can then take advantage of the perverse incentive to pay as high a price as possible for the asset. The preapprovals of CU4 in 2008 and the hydros in 2013 are perfect examples of this ratepayer abuse. The acquisitions themselves may have been wise, but the preapproved costs were hundreds of millions of dollars higher than they should have been. The results: Windfalls for NorthWestern Energy. Rip-offs of the ratepayers. Weakening of the economy. Weakening of the propped-up utility itself, that dodges its own market-based accountability, and the normal incentives of risk and reward that produce best practices and best performance.
These are the inevitable outcomes of clipping the PSC’s wings through preapproval.
Representative, this is one of those bills that, at hearing, was bound to attract an overwhelming number of special interests and professional lobbyist proponents. The voice of the average Montana consumer – who is most affected by this legislation — was completely drowned out. The typical ratepayer was unaware of what was going on, knew nothing about the process of preapproval, and only knew that for some reason, they have been paying more and more for their energy and can’t figure out why.
You need to figure that out for them. You need to be their voice.
You need to vote NO on the HB 284 Blackmail Bill. For them.
Respectfully and sincerely, Roger Koopman
Public Service Commissioner, 2013 – 2020