PSC adopts rule restricting utility contracts 

The state Public Service Commission Tuesday voted to adopt a rule making it harder for small, renewable-power projects to get “standard” contracts to sell their power to NorthWestern Energy.

The new rule, adopted on a 3-2 vote, reduces from 10 megawatts to 3 megawatts the maximum size of a project that can get a contract without having to compete against other, larger projects in a competitive bidding process.

The five-member PSC had been considering lowering the threshold to only 100 kilowatts, or one-hundredth of its current 10-megawatt limit, but instead chose a compromise level of 3 megawatts.

Still, an attorney representing wind-power producers said afterward that even the three-megawatt threshold makes it unlikely any relatively small wind project will get a contract.

Wind-power projects of 3 megawatts or less aren’t financially feasible, said Mike Uda of Helena, and projects larger than 3 megawatts – yet still relatively small – haven’t won any competitive bids from the utility.

“(Small projects) over the standard-offer threshold don’t get a contract, because the competitive solicitation process is either not held or not fair,” he said.

Wind-power producers and developers of other small, renewable power projects, such as hydroelectric, showed up in force at a June hearing before the PSC, opposing the rule change. They said it would torpedo any future small, renewable-power projects that the utility didn’t want.

They also said the change flies in the face of the federal law requiring small, renewable power projects to have a legitimate chance at getting a contract to sell their power to the local utility.

NorthWestern Energy has supported the change, saying it would allow the utility to buy power from the lowest-cost source, rather than being forced to buy from small producers who qualify for the standard rate set by the PSC.

Commission Chairman Bill Gallagher, R-Helena, pushed the rule change after Gov. Steve Bullock, a Democrat, vetoed a bill passed by the Legislature that created the 3-megawatt threshold.

The measure, House Bill 188, said the PSC couldn’t set rates for small, renewable power projects that are larger than 3 megawatts.

Last month, the Legislature’s Energy and Telecommunications Interim Committee voted unanimously to object to Gallagher’s proposal to set the threshold at 100 kilowatts and said if the PSC wanted to set the limit by rule, it should go with 3 megawatts.

“We felt that going down to 100 kilowatts was a little extreme,” Sen. Alson Olson, R-Roundup, said Tuesday. “Looking at some of the small hydro projects that are coming up, we felt the 100-kilowatt rule would throw them totally out of the picture.”

Commissioner Bob Lake, R-Hamilton, who voted for the rule change, proposed the 3-megawatt compromise, so “we can move forward with this thing.”

Gallagher and Commissioner Kirk Bushman, R-Billings, supported it as well.

Commissioner Travis Kavulla, R-Great Falls, has opposed the rule change from the beginning and voted against it Tuesday. He said if the commission is going to “box out” small renewable power projects from getting a standard contract, it should ensure that the competitive bid process is fair – and he’s not convinced that it is.

Commissioner Roger Koopman, R-Bozeman, also opposed the change, but said he he wanted to go with the even lower 100-kilowatt threshold. Going with the 3-megawatt threshold is “bending to what I consider to be legislative silliness,” said the former state legislator.