Montana PSC adjusts property tax expense allocation methodology for NorthWestern Energy

The Montana Public Service Commission (PSC) adjusted the methodology by which NorthWestern Energy allocated its property tax expenses among customers, resulting in a $3.5 million reduction in rates.

According to the PSC, the previous methodology led to some customers paying an unfair share of the expenses.

“As Montana taxes increase faster than other expenses on NorthWestern’s transmission system, the amount of the cross-subsidy from retail to wholesale customers has continued to grow,” Travis Kavulla, vice chair of the commission, said. “The new methodology fairly allocates these taxes based on the actual use of the electric transmission system.”

NorthWestern uses a tax tracker each year to adjust rates to collect increases or reductions in its property taxes. Last year, NorthWestern paid $148 million in property taxes. Between 2012 and 2016, property taxes for NorthWestern’s electric utility rose by nearly 60 percent.

In early 2017, NorthWestern failed to answer questions from the PSC about how it allocated these expenses to retail customers, the PSC said in a press release.

Afterwards, the Commission adopted new rules that increased the number of data utilities must submit on their annual tax tracker applications. The information the PSC received this year led it to order refunds.

The PSC voted 3-2 to apply the adjustment to both the 2017 and 2018 tax years.