MDU electric rates increasing in Eastern Montana

Electric rates are increasing for Montana Dakota Utility customers under a plan approved by Montana utility regulators this week.

On average, MDU residential customers will pay an additional $2.33 a month, an interim increase intended to hold MDU over as the Montana Public Service Commission weighs a larger, more permanent increase in rates.

The interim rate increase is 2.6%. MDU has roughly 26,000 metered customers in Montana, who combined will pay MDU an additional $1.7 million annually. The larger increase sought is $10.5 million.

The vote to increase rates wasnt unanimous on the all-Republican commission. Randy Pinocci and Tony ODonnell are commissioners with Eastern Montana constituents in MDU territory. Both voted against the bill.

Pinocci specifically expressed his lingering disappointment over MDUs decision to close the Lewis and Clark Generating Station, a small coal-fired power plant near Sidney, which was shuttered in March 2021.

We were told that if we close the Sidney coal plant, rates would come down, Pinocci said before the vote. There was testimony that the Sidney coal plant was expensive. It was a higher rate than energy that could be bought on MISO.

MISO is the acronym for Midcontinent Independent System Operator, an organization that manages generation and transmission from multiple sources spread across 15 states and Canadian province of Manitoba. MDU is a MISO member. The power it purchases from MISO had for some time been more economical for customers than what it generated at Lewis and Clark.

MDU in its application to increase rates says it has saved customers $1.93 million in fuel and purchased power costs by closing Lewis and Clark, along with two coal-fired generators at Heskett Power plant near Mandan, North Dakota. The long-term savings are expected to be $20 million. However, the utility still has to decrease the debts associated with the retired power plants over the next 10 years, at a pace of about $2 million a year. The retired coal burners were built in the 1950s.

The utility points to the cost of a new gas-fired power at Hesket, plus increased operations and maintenance costs combined with property taxes as drivers of its rate increase.

ODonnell questioned the amount of the interim rate increase, saying he needed more information and calling the vote premature.

I have several questions about the amount of this particular rate increases requested, even in the interim basis, recognizing that it is refundable with interest should the commission approve a smaller amount than this, as a permanent rate increase, ODonnell said.

Interim rate increases serve as a hold while regulators determine the value of a permanent rate increase. It is not uncommon for the interim rate increase to wind up being lower than the permanent amount later determined, in which case the difference is credited back to customers with interest. However that credit might come more than a year after consumers started paying the interim rate.

Commissioner Jennifer Fielder, of Trout Creek, said the interim rate increase proposed by MDU was substantially lower than the permanent rate sought and she would support it.

Where the interim rate increased average residential bills $27.96 annually, the permanent increase sought would raise annual rates by $204 or 19%.

MDU asserts that over time its rate of return has declined to about 5.5%, which is down from the 7.5% requested by the utility in its last electric rate case, which was filed in 2018.

Commissioners Anne Bukacek, of Kalispell and James Brown, of Helena, joined Fielder in approving the increase.