Last year, the company estimated that the cost of electricity supply to customers would average $0.0405 per kilowatt hour (kWh) during the July-to-June tracker year, but the actual average cost ended up being $0.038 per kWh. Since NorthWestern adjusts the actual cost of electricity to customers on a monthly basis, customers have already received the benefit of the lower than expected costs.

This year the company estimates an average cost of $0.041 per kWh due in part to former "choice" customers returning to default supply. The actual cost will depend on the price and amount of power the company will need to purchase for the returning customers, overall market conditions, and weather over the next tracker year.

For a typical residential customer using 750 kWh, this estimate results in a 90 cents per month increase in supply cost compared to the previous year's actual average cost. The company also has requested an adjustment, which amounts to 10 cents per month for the average customer to recover uncollected electric supply costs over the last two years.

Customers will also notice other rate adjustments on their bill, including a decreased Competitive Transition Charge for Qualifying Facilities (CTC-QF), and an increase in the BPA Residential Exchange Credit. These items offset the supply cost and deferred account balance increases in the total bill, meaning that typical residential customers will see an overall increase of 58 cents per month. Actual results depend on customers' usage.

"As evidenced by our results this year, we continue to work hard for our customers by continually scrutinizing the default supply load and its sensitivity to weather," said Pat Corcoran, vice president of regulatory affairs. "We closely watch changing market conditions related to price, transmission, unit outages, and other operational events, and take actions that best serve the interests of our default supply customers."

Corcoran added that the company would continue to strive to provide rate stability and keep electricity costs as low as possible for consumers this year, too. "We know that we have additional load returning to default supply over the next few months, which will increase our reliance on the short-term market. We want to assure customers that we will continue to mitigate market price risk to the best of our ability."

NorthWestern Energy, as noted in its Electric Default Supply Plan, wants to significantly reduce reliance on the short-term market by entering into additional long-term contracts with power suppliers and enhancing energy conservation activities. NorthWestern's annual tracker filing includes requests to cover energy purchases made from Tiber Dam LLC, a new hydro-electric facility that was recently inaugurated; Thompson River Cogeneration, which expects to come online later this year; and energy conservation purchases made through the company's Demand Side Management (DSM) Program.

"Cost-effective DSM is intended to reduce the overall cost and risk of obtaining power on behalf of default supply customers," said Bill Thomas, coordinator – demand side management. "However, there is a cost associated with the development, implementation, and operation of these programs. We will track these costs on an annual basis through the tracker.

The company's Electric Default Supply Plan was submitted to the MPSC earlier this year and is currently undergoing public review and comment. The entire Default Supply Plan is available at www.montanaenergyforum.com.

Publication date: 07/19/2004