Federal and Montana regulations have special rules that lower costs for certain types of energy producing plants legally referred to as qualifying small power production facilities or QFs. A bill that is only one day away from becoming law and a statement from the Public Service Commission indicate that the rules for Montana QFs change significantly this week.

According to the Federal Energy Regulation Commisison, QFs have received special regulatory treatment and special rates since the Public Utilities Regulatory Policies Act of 1978. The goals of the initial act are as follows:

  1. The conservation of electric energy,
  2. Increased efficiency in the use of facilities and resources by electric utilities,
  3. Equitable retail rates for electric consumers,
  4. Expeditious development of hydroelectric potential at existing small dams, and
  5. Conservation of natural gas while ensuring that rates to natural gas consumers are equitable.

QFs include projects such as small hydro plants and, more notably in Montana, wind farms. Nationally, these projects receive QF status if they produce no more than 100 kilowatts of electricity, but the rule was changed by the Public Service Commission in Montana in 2007 to allow projects that produce up to ten megawatts.

New Public Service Commission Chairman Bill Gallagher indicated that the Montana rule put Montana rate payers at risk and favored the energy companies.

In Gallagher's viewpoint, the risk to rate payer's pocketbooks increases as more and more plants with intermittent energy production (like wind) come onto the grid, because other sources of power are needed to keep the grid in balance and reliable when the intermittent sources are not working.

"It would necessitate consumers to have to invest in more plants like David Gates," Gallagher said. "David Gates was a $200 million plant. The rate payers are paying for that, however the wind producers who get the benefit of that regulation they only have to pay what is called the marginal cost of David Gates, basically the fuel cost."

One way or another, the Montana standard will likely match the Federal standard in the near future. One avenue for a rule change is a piece of legislation known as House Bill 188, which will become law on May 7 unless Governor Steve Bullock vetoes it.

"If it becomes law, well then that solves the problem, the legislature fixed the mistake that the former commission made," Gallagher said. "If it doesn't become law, I plan to fix the problem that the former commission made by adjusting the rule limiting QFs to be the same as the federal law."

According to a Public Service Commission press release, "the PSC is scheduled to consider Gallagher's work session request at 9:30 a.m. Tuesday in the agency's Bollinger Room at 1701 Prospect Avenue in Helena. If approved by the Commission, the PSC would conduct a public hearing on the proposed rule change as early as June 12."

Bill Gallagher