NorthWestern Energy to buy 25 percent share of Puget Sound Energy’s Colstrip Unit 4

Published on December 11, 2019 by Chris Galford

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NorthWestern Energy recently filed for the right to buy up a 25 percent interest in the Montana-based, Colstrip Unit 4 owned by Puget Sound Energy for a $1 investment.

NorthWestern will submit its application for pre-approval early next year. The effort will yield 185 megawatts of generation for NorthWestern if the Montana Public Service Commission approves. NorthWestern would also seek to sell 90 megawatts back to Puget Sound Energy for approximately five years. While the benefits of the transaction could amount to around $5 million annually, NorthWestern intends to forego those benefits and make the net effect on customer bills a wash as well.

“NorthWestern Energy will continue working to make our energy supply more sustainable,” Bob Rowe, NorthWestern Energy president and CEO, 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.”

NorthWestern has also committed to reducing carbon generation in Montana by 90 percent by 2045. This pairs with a pledge to use the profits foregone on the Colstrip project to address environmental remediation and decommissioning costs when Unit 4 is retired.

“Even with projected operating and maintenance costs factored in, purchasing more of Colstrip Unit 4 for only one dollar is by far the most affordable way to help close the gap in the capacity shortage facing our customers,” John Hines, NorthWestern Energy vice president of Supply and Montana Government Affairs, said. “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.”

If approved, NorthWestern’s stake in Colstrip Unit 4 will reach 55 percent. The company notes that the five-year power purchase agreement will pay for about 50 percent of the fixed operations and maintenance costs, as well as property taxes on the new share, while the other 50 percent will be offset by the reduction in market purchases required.

In a separate transaction, NorthWestern also intends to acquire a piece of Puget Sound’s interest in the 500 kilovolt Colstrip Transmission System with 95-megawatt capacity.