NorthWestern Energy said it will file an application for pre-approval with the Montana Public Service Commission to acquire Puget Sound Energy’s (PSE) 25% interest, 185 megawatts of generation, in Colstrip Unit 4 for $1. In addition, NorthWestern Energy is committing to reduce the carbon intensity of its energy generation in Montana by 90% by 2045.
“Nothing is more important to the people of NorthWestern than safely providing Montanans with the affordable and reliable energy we all need while also protecting our environment,” said NorthWestern Energy President and CEO Bob Rowe. “We take that dual responsibility seriously, and right now our state faces an urgent capacity shortage — energy that’s available 24 hours a day, 365 days a year, regardless of the weather.”
The carbon-reduction commitment is part of NorthWestern Energy’s goal to work toward an even cleaner energy future for the state.
“NorthWestern Energy will continue working to make our energy supply more sustainable,” Rowe said. “Securing more capacity for only a $1 investment is a unique opportunity that helps give us the time to continue transitioning to an even cleaner energy future without putting either our customers’ safety or their ability to pay their energy bills at risk.”
In late January or early February, NorthWestern Energy will submit the application. NorthWestern Energy will also seek approval to sell 90 MW to PSE for roughly 5 years. NorthWestern Energy estimated a savings of $5 million annually, which will be used for environmental remediation and decommissioning costs associated with NorthWestern Energy’s existing ownership when the time comes to retire Unit 4.
PSE remains responsible for its presale 25% ownership share of all costs for remediation of existing environmental conditions and decommissioning regardless of when Colstrip Unit 4 retires.
The fixed operations and maintenance costs and property taxes for the additional 25% share of Colstrip Unit 4 are estimated to be approximately $15 million annually. The 5-year power purchase agreement with PSE will pay for about 50% of this amount and the other 50% will be offset by the reduction in purchases from the market.
If the sale is approved, NorthWestern Energy will own 55% of Colstrip Unit 4.
Acquiring a greater stake in Colstrip Unit 4 does not solve NorthWestern’s capacity shortage, Rowe explained, but it will meet about 25% of the overall capacity needed while Montana transitions to using more carbon-free energy sources in the future.
“Even with projected operating and maintenance costs factored in, purchasing more of Colstrip Unit 4 for only $1 is by far the most affordable way to help close the gap in the capacity shortage facing our customers,” said John Hines, NorthWestern Energy vice president supply and Montana government affairs. “No other option — buying additional energy from the market or building a plant that would generate this amount of energy over multiple days when it is needed the most — can achieve the same results.
In the coming months, NorthWestern said it will issue a Request for Proposal (RFP) open to all proposals capable of meeting customers’ identified need. A technically experienced third party will administer the RFP.
In a separate transaction, NorthWestern Energy will acquire a piece of PSE’s interest in the 500-kv Colstrip Transmission System (CTS) with 95-MW capacity for net book value at the time of the sale. The cost is estimated between $2.5 million and $3.75 million. After the roughly 5-year purchase power agreement with PSE ends, NorthWestern Energy will have the option to acquire another interest in the 500-kv CTS with 90-MW capacity for net book value at that time.
NorthWestern Energy operates the CTS and currently owns 30.8% of the CTS.
The acquisition of the additional interests in the CTS from PSE is contingent on approval of the sale of 25% of Colstrip Unit 4 to NorthWestern Energy.