Montana Public Service Commission votes to allow up to 15-year contracts

The Montana Public Service Commission (MPSC) voted last week to extend the maximum term of contracts for small renewable energy projects to 15 years, up from 10.

At the same time, the MPSC voted to reconsider a related June order that established standard rates and contract terms for such projects. Any qualifying facility up to three megawatts is potentially affected. The reconsideration had been pushed for by several energy organizations, and Chairman Brad Johnson said the commission welcomes the opportunity to refine their earlier order.

As for the matter of contract length, such issues are governed by the Public Utilities Regulatory Policy Act (PURPA). It requires utilities to purchase power from small renewable energy projects at the same cost it would take them to purchase that energy and capacity elsewhere. The new 15-year contracts still adhere to this principle.

“A 15-year contract provides sufficient protection for the ratepayer while giving investors the certainty that they need to move forward with energy projects in Montana,” Commissioner Bob Lake said.

If the PURPA remains in effect after 15 years, the utility would then be required to continue purchasing electricity from the qualifying facility at an updated rate. This limit will apply to all new power plants regardless of ownership or resource type–not just the small renewable generators.

In the case of the increased contract lengths, however, there was a dissenting voice in the form of Commissioner Roger Koopman, who said that existing contract lengths were already fair and actually provided stronger protections for ratepayers.

“Nothing has changed since we made our original decision and the Commission should have stood its ground,” Koopman said. “Adding another five years to level rate contracts increases the over-charge risk to consumers exponentially. Many examples of this already exist, where Montana ratepayers are forced to pay rates that are dramatically above market, due to very long-term QF power purchase contracts.”