Imagine that you were forced to sign a 25-year contract for gas for your car at three to four times the market price. That’s the exact situation NorthWestern Energy customers were facing without the Public Service Commission’s recent action to reduce the contract length and rate available to small renewable projects known as Qualifying Facilities.
As usual with actions that put ratepayers first, those who would have us promote renewables at any cost are hopping mad.
The federal law that the commission must follow, PURPA, clearly states that ratepayers shouldn’t pay more for one form of energy over another. That law also requires “long-term” contracts for renewable energy projects without providing a precise definition of “long-term.”
Until recently, contracts were set at a term of 25 years; however, the commission received compelling testimony from the state consumer advocate, the Montana Consumer Counsel that fixed price, 25-year contracts were “excessively risky for customers.” My colleagues and I on the commission agreed and earlier this month we voted to reduce contracts to a maximum of 10 years.
The price that NorthWestern must pay for the power supplied by renewables is ultimately born by the consumer. The PSC’s charge is to ensure that customers, you and I, pay no more for alternative energy than we otherwise would for power generated by the utility or purchased from the open market. The longer the length of the contract the less accurate these calculations become, and the greater the likelihood that consumers will wind up paying too much.
Case in point, last June the commission blocked a proposal by a handful of developers to build 130 megawatts of new solar generating capacity at a highly inflated rate of $66 per megawatt hour, roughly three times the market price today. That action is projected to…