NorthWestern Energy purchase of Puget Sound Energy's share of Colstrip Unit 4 terminated

Rhea-AI Summary

NorthWestern Energy has terminated its agreement to purchase 92.5 megawatts of capacity from Colstrip Unit 4 due to regulatory opposition. The Washington Utilities and Transportation Commission criticized the deal for favoring Montana customers over Washington's, reducing the likelihood of approval. This decision poses a challenge for NorthWestern, which faces a peak demand shortfall of approximately 365 megawatts in a shrinking market. NorthWestern has now increased urgency in securing additional capacity, with a request for proposals for 280 megawatts to serve its customers by 2023.

Positive

• NorthWestern Energy has requested proposals for 280 megawatts of capacity to serve peak demands starting in 2023.

Negative

• The termination of the Colstrip Unit 4 purchase increases NorthWestern's peak demand shortfall to approximately 365 megawatts.
• Regulatory criticism from WUTC likely hampers NorthWestern's future capacity acquisition efforts.

BUTTE, Mont., Oct. 29, 2020 /PRNewswire/ -- NorthWestern Corporation d/b/a NorthWestern Energy (Nasdaq: NWE)  – After evaluating recent Montana regulatory decisions regarding Colstrip, NorthWestern Energy has agreed with Puget Sound Energy to terminate the transaction to buy 92.5 megawatts of capacity generation at Colstrip Unit 4 and an additional interest in the Colstrip Transmission System from Puget.

The sale required approval from the Montana Public Service Commission and the Washington Utilities and Transportation Commission. This month the WUTC's staff criticized the agreement, suggesting it provided too much value to Montana customers at the expense of Puget's Washington customers, substantially reducing the likelihood the WUTC would approve the sale.

"This is a huge loss for Montana and our customers," said NorthWestern Energy Vice President Energy Supply and Montana Government Affairs John Hines. "We pursued this agreement because it provided a way to immediately address some of our critical capacity shortage at a very low cost. In addition, it created a reserve fund to address the environmental costs for NorthWestern Energy's existing share of Colstrip Unit 4, which would have benefited our Montana customers. The environmental responsibilities for the purchased share of Colstrip Unit 4 remained with the seller. And it gave us the opportunity to add transmission assets to import and export energy to and from Montana.

"It is disappointing that policies enacted by the Washington legislature are controlling Montana's natural resources and our ability to reliably and cost-effectively serve our Montana customers. It is also disappointing that decisions by the Montana Public Service Commission have been so unsupportive of this vital generation."

"The WUTC staff was critical of the agreement for NorthWestern Energy to sell Colstrip Unit 4 power back to Puget Sound Energy, noting that they were very uncomfortable with the risk to Puget's customers of 45 megawatts of power sales tied to market prices," said Hines. "Meanwhile, parties provided testimony to the Montana Public Service Commission advocating putting Montana customers in that risky position. Unfortunately, with the end of this transaction, NorthWestern Energy's customers require about 365 megawatts of capacity purchases to serve peak demand from a market that is shrinking, with no price ceiling. One only needs to look at the blackouts in California this past summer to appreciate the significance of the need for capacity resources. It is no longer hypothetical, capacity shortages are real."

Recent Washington policies are contributing to the closure of thermal generation in the Pacific Northwest and growing shortages of capacity resources when energy demand is high. NorthWestern Energy's Montana portfolio is far short of the capacity resources needed to meet our customers' peak energy demands, which makes the decreasing availability across the West a threat to reliable and affordable service.

NorthWestern Energy has requested proposals for 280 megawatts of capacity to begin serving Montana customers in 2023. The now abandoned purchase of Puget Sound Energy's share of Colstrip Unit 4 creates a greater urgency on NorthWestern Energy to secure all of the capacity solicited in the request for proposals.

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About NorthWestern Energy (Nasdaq: NWE)
NorthWestern provides electricity and / or natural gas to approximately 734,800 customers in Montana, South Dakota, and Nebraska. We have generated and distributed electricity in South Dakota and distributed natural gas in South Dakota and Nebraska since 1923 and have generated and distributed electricity and distributed natural gas in Montana since 2002. More information on NorthWestern is available on the company's website at www.northwesternenergy.com.

View original content:http://www.prnewswire.com/news-releases/northwestern-energy-purchase-of-puget-sound-energys-share-of-colstrip-unit-4-terminated-301163466.html

SOURCE NorthWestern Energy

FAQ

What was the reason for NorthWestern Energy's termination of the Colstrip Unit 4 purchase?

NorthWestern Energy terminated the purchase due to regulatory criticism from the Washington Utilities and Transportation Commission, which viewed the agreement as unfair to Washington customers.

What is the current capacity shortfall faced by NorthWestern Energy?

NorthWestern Energy is facing a capacity shortfall of approximately 365 megawatts to meet peak demand.

What actions is NorthWestern Energy planning to address capacity shortages?

NorthWestern Energy has requested proposals for 280 megawatts of capacity to begin serving customers in 2023.

How did regulatory decisions impact NorthWestern Energy's operations?

Recent regulatory decisions have created obstacles for NorthWestern Energy in securing critical capacity resources, affecting its ability to reliably serve Montana customers.