The Montana Public Service Commission (PSC) has approved a rate increase of 28 percent over a year ago for NorthWestern Energy customers. It will become effective next month, however much of the approved increase has already been incorporated into customer bills, because of an interim rate increase granted by the PSC in September 2022.

The increase amounts to $100 million in increased revenues for NorthWestern Energy — $82 million in electricity revenues and $18 million in natural gas revenue. A portion of the rate increase is due to NorthWestern Energy’s increased property taxes, which the PSC cannot alter.

According to PSC legal counsel, 40% of the rate increase can be attributed to “flow-through” costs, including property taxes and market power purchases, which the company is forced to purchase when peak use exceeds the available production from its own power plants.

The escalating increase in costs of generation is, in part, attributable to the utility company’s federal mandate to shift to alternative energy sources and away from lower cost carbon based production.

A couple dozen people testified before the PSC saying the rate increase is unfair, especially for people on fixed incomes. Some of the utilities largest commercial customers opposed the increases, claiming that the commercial rates subsidize residential customers. Among those speaking in opposition to the proposed rate increase were representatives of organizations like the Montana Environmental Information Center (MEIC), which in the past has strongly advocated for more expensive alternative energy sources to reduce carbon emmissions.

In testimony before the PSC, MEIC and others, who have opposed it, were critical of NorthWestern Energy’s natural gas plant under construction at Laurel, however, none of the cost of building that plant is included in calculating this rate increase. NorthWestern Energy claims the plant is necessary to enable them to meet peak energy demand and avoid having to purchase high priced energy on the market, previous costs for which are included in this rate increase.

The last electrical rate increase NorthWestern Energy received was 2018, following a rate increase for natural gas in 2016.

Since their last rate increases, NorthWestern reported that it has invested $835 million into its electricity infrastructure and $257 million in its natural gas infrastructure.

Taking into account the inclusion of the interim rate in the bills, an average residential customers using 750-kilowatt hours per month will see an increase in their bill of about $8 or 7.6%.