A Montana state district court judge says a law granting NorthWestern Energy the ability to rate base proposed resources before they are built is unconstitutional.

The law, enacted in 2003 and amended in 2007, violates Montana's constitutional prohibitions on granting irrevocable special privileges and passing laws tailor-made for specific entities when a general law is possible, Missoula County District Judge Jason Marks said in a May 6 ruling.

"The preapproval process offers NorthWestern alone the substantial financial benefit of rate basing its acquisition of an energy supply resource before or at the time the resource is acquired," Marks says in the decision.

Three individual ratepayers and the group 350 Montana sued the state and NorthWestern in May 2021 seeking to overturn the law. They filed their lawsuit after NWE asked the Montana PSC to preapprove two proposed resources—a 175 MW natural gas-fired plant in Laurel, Mont., and a power purchase agreement with a 50 MW battery storage system (CU No. 2007 [9]).

NWE pulled its preapproval request for the Laurel natural gas plant to take advantage of favorable construction costs it says could be jeopardized as the process drags on (CU No. 2023 [11]). The utility said it would instead seek to rate base the plant's costs once it is built. Site work on the plant started in April and the company expects it could be on line either in late 2022 or early 2023.

The judge's decision puts the 50 MW battery project in jeopardy, NWE spokeswoman Jo Dee Black told Clearing Up.

"NorthWestern Energy is extremely disappointed by the decision," she said. "It undercuts a key mechanism for creating reliable and affordable electricity for Montanans."

The statute allows the MPSC and intervenors to evaluate potential resources in a public process, she said. "NorthWestern will almost certainly appeal this decision."

Critics say the preapproval process allows the utility to sidestep evaluation. The law also prevented the commission from reversing its decision if it later determined that a preapproved resource was actually an imprudent investment.

Marks struck down that provision of the law, as well.

"In the grand scheme of things, with greenhouse gas emissions soaring and a hot-house climate taking hold in Montana, with increasing mega fires, warming streams and rivers, chronic drought, and extreme weather events, this is a small victory," 350 Montana co-Chair Jeff Smith said in an email to Clearing Up. "But, it's significant. NorthWestern won't be able to use preapproval to shortcut regulation and public participation."

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Contributing Editor

Dan has covered stories from Seattle to Tbilisi; spent time with the AP, Everett Daily Herald and Christian Science Monitor; and was twice a member of a team nominated for a Pulitzer Prize. He and his wife have three young children and live in Seattle.