HomeMy WebLinkAboutHydro Fact Sheet Spring 2014NorthWestern Energy has reached an agreement with PPL
Montana to buy 11 hydroelectric facilities, including 633
megawatts of generation capacity, a storage reservoir and
related assets for $900 million. The dams and reservoirs
offer reliable performance, low operating costs and favorable
environmental attributes and will help NorthWestern’s
customers avoid the risk of current and future carbon
regulation.
The PPL facilities, which have been well-maintained and
have many decades of operational life ahead, offer clean,
sustainable and reliable hydro power for our Montana
customers. Because the dams have no fuel costs, prices to
customers will be based on the cost of production, not the
market. We view the purchase like a home mortgage, where
a buyer locks in the cost of a home and avoids the risk of
rising rental prices. You will pay a little more at first, but will
pay much less over time and won’t be subject to volatile,
uncontrollable increases in energy supply costs.
The deal: The hydro facilities were built over the decades
by the former Montana Power Co. and sold to PPL Montana
after electric deregulation in Montana. PPL has invested
nearly $350 million in the facilities during its ownership. The
dams have never been owned by NorthWestern Energy
or been part of the price its customers have paid for
electricity. The $900 million purchase price is a market-based
transaction with PPL and is not negotiable. If NorthWestern
A Once-in-a-Lifetime Opportunity for Montana
PPL Hydro Acquisition
April-May 2014
doesn’t buy the dams, there will be a number of other
potential buyers, including out-of-state utilities and possibly
hedge funds, ready to strike a deal with PPL. In that scenario,
it is very likely that electricity generated here could end up
serving consumers in other states and Montana will have lost
an opportunity to benefit from resources within its borders.
Bill impact: We expect to gain long-term stability in electric
bills by eliminating the risk of rising fuel prices and reducing
NorthWestern’s need to buy power at market prices. The
actual bill impact is in flux depending on what market prices
could be, and what date one is comparing the bills to. Over
time, as the plants are paid for, that cost of the electricity
they generate will drop, resulting in lower supply costs for
customers. We expect a short-term bill increase from the
dam purchase but the benefits in the form of lower bills could
come within just a few years.
Time Frame: The agreement with PPL was announced in
September 2013. NorthWestern formally asked the Montana
PSC to approve the deal in December. Formal hearings are
set for July. We hope to earn approval in September 2014.
Community Impact: About 85 employees of PPL Montana’s
hydro operations are expected to join NorthWestern.
NorthWestern is a strong corporate citizen and like PPL
Montana, is committed to the communities near the hydro
facilities. Also like PPL, we have thoroughly investigated
the cost of maintaining the dams and reservoirs and have
great confidence in their structural integrity and long-term
generation potential.
Tax impact: We expect to see only minor differences in the
property taxes paid on the hydro assets by NorthWestern
and the taxes now paid by PPL Montana, which are about
$12.4 million annually. NorthWestern is by far Montana’s
largest taxpayer with a 2013 property tax bill of $94.7 million.
Key Reasons Why Hydro is a Great Fit
• Dams and reservoirs are an existing resource with no
development risk
• The dams are located in our MT service territory and mesh
with our transmission system
• Hydro adds diversity to our energy portfolio, of which more than
50 percent will come from renewable sources after the acquisition
• No fuel costs, sheltering customers from market-price spikes
• Dams are non-carbon emitting, a great addition to an
environmentally responsible energy portfolio
• Customers will see stable future prices after a small initial
rate increase.
The hydro facilities represent a once-in-a-lifetime
opportunity for NorthWestern and its customers to
acquire clean, renewable sources of electricity that will
serve Montana for many decades. The purchase is also
a giant step away from electric supply deregulation and
a great opportunity to have Montana resources owned
by a Montana-focused company and dedicated to
serve Montana consumers.
Plant Net Capacity
(MW)
Ownership%COD River Source FERC License
Expiration
5-Yr Avg.
Capacity
Factor (2)
Black Eagle 21 100%1927 Missouri 2040 73.6%
Cochrane 69 100%1958 Missouri 2040 49.1%
Hauser 19 100%1911 Missouri 2040 79.3%
Holter 48 100%1918 Missouri 2040 72.4%
Kerr (3)194 100%1918 Flathead 2035 64.5%
Madison 8 100%1906 Madison 2040 89.2%
Morony 48 100%1930 Missouri 2040 63.8%
Mystic 12 100%1925 West Rosebud Creek 2050 48.2%
Rainbow 60 100%1910/2013 Missouri 2040 77.5%
Ryan 60 100%1915 Missouri 2040 79.8%
Thompson Falls 94 100%1915 Clark Fork 2025 60.1%
Total 633 66.1%