The risk of failing to plan should be on monopolies' investors, not Montanans

In deciding whether my daughter would walk to kindergarten, like any parent, I assessed the risk involved. Now that she’s in high school, we have different risks to consider. Risk management is something we all do every day.

Monopoly utilities like NorthWestern Energy, Montana Dakota Utilities, and rural cooperatives also manage risk. As regulated utilities, NorthWestern and MDU are required to file a plan with the Public Service Commission evaluating the most cost-effective way to serve Montanans, considering all resource alternatives. NorthWestern filed its most recent plan and a supplement to that plan at the end of December, 2020. In January, NorthWestern executives presented the plan to the Commission. Climate risk was not addressed.

Risk is the product of probability and damage. Nearly all utility executives think climate change has contributed to increased extreme weather events impacting their electricity networks over the past decade, and that severe weather brings increased financial risk to their businesses. Only two countries have a gross domestic product higher than the debt exposed to climate risk – $7.2 trillion across 18 sectors. Close to 100% probability times $7.2 trillion = a very high number. Yet utilities are not including this risk in their procurement plans. The monopolies have access to information we do not, and that structural inequality positions them to plan and prepare for risks.

These monopolies vociferously protest Commission actions they consider harmful to credit ratings. However, they have no plan for the environmental considerations and consequences of climate change, which the investment company Moodys considers increasingly relevant when assessing credit quality. While some electric utilities have acknowledged climate risk in corporate filings with the U.S. Securities and Exchange Commission, most of these utilities have yet to integrate climate considerations into their planning decisions.

In Montana, a hotter, drier, climate intensifies the risk of utility-sparked wildfires, and resulting costs. Before these monopolies can pass costs related to these known risks on to Montanans, government regulators must assess a utility’s historic reliance on resources that contribute to climate change, and the planning they have undertaken to address it.

Montana law requires the Commission to allow public comment on a utility’s procurement plan. To date, the Commission has not noticed the supplement for public comment. Montanans will want to watch how the Commission allocates the consequences for failing to plan for climate risk. Monopolies should not recover costs from us if they didn't adequately plan for climate risks such as severe storms, wildfires or flooding.

Monica Tranel grew up in eastern Montana represents clients in front of the PSC. She formerly worked as a staff attorney for the PSC and the Montana Consumer Counsel.