The company hired The Liberty Consulting Group, a Quentin, Pa., engineering consulting firm, to evaluate its inspection and maintenance practices for its electric and natural gas transmission and distribution systems, system performance, reliability, and the work priority system and resulting expenditures. NorthWestern requested an opinion as to whether its standards and procedures meet the criteria for "good utility practices." Liberty also identified and recommended steps for improvement.

"The report determined that our operations are generally consistent with good utility practices, and the recommendations are meant to focus our attention on those areas where we could improve," said Mike Hanson, chief operating officer. "We agree with many of the recommendations and have already begun implementing some of them. There are some recommendations that we believe should be modified or require more study before further action is taken."

Hanson noted that NorthWestern Energy has already begun addressing the need to increase required staffing of field operations, craft, and engineering positions. The company also concurs with the suggestions to enhance existing inspection and maintenance programs and believes that Liberty's tree-trimming recommendations are feasible with some modifications.

"As the Liberty consultants noted in their audit, some of the recommendations such as systematic underground cable replacement programs and outage analysis systems are expensive, and we need to work with the MPSC, Montana Consumer Counsel, and others to determine if the potential outcome justifies the expense," added Hanson.

NorthWestern Energy has established a five-year budget as part of its restructuring plan, and it will incorporate the cost of the accepted recommendations into the budget-planning process. However, the company says that it is not feasible to fund the entire cost associated with the audit recommendations under current rates. The company has the opportunity to earn an authorized rate of return, approved by the MPSC, on the delivery of energy to customers through its transmission and distribution system. Those rates have not changed since 2000.

"We need to work cooperatively to develop creative solutions that will improve reliability and system integrity without placing undue burdens on our customers," Hanson said.

NorthWestern Energy will provide quarterly progress updates with the MPSC beginning in January 2005 to inform staff and commissioners on the steps NorthWestern is taking to address the recommendations.

Publication date: 09/13/2004