Bob Glanzer Generating Station
By NorthWestern Energy Vice President Supply and Montana Government Relations John Hines
NorthWestern Energy always works to protect our customers from energy market price spikes to keep rates as affordable as possible while maintaining reliable energy service.
Recently some have speculated that hedging would insulate Montanans from high market energy price spikes.
Hedging transactions can be used to reduce price risk - to protect against price spikes and/or supply scarcity. Unfortunately hedging transactions are not a guarantee of lower prices but can provide customers with greater price certainty and supply availability.
In this most recent cold spell NorthWestern Energy did use hedging tools to secure the physical delivery of electricity and natural gas, which directly contributed to the reliable service we were able to provide during the extreme weather this month. We also had over 500 megawatts of fixed-price generation or contracts that reflected generation. It is extremely difficult to fully hedge our electric portfolio when on some days we have excess energy with variable wind generation and on other days we are short, when the wind isn’t blowing. This is a variability of energy problem, not a hedging problem.
When variable wind and solar resources are not generating, as was the case during the highest demand periods during our recent cold snap, and customer demand is high, reliable energy service in Montana can only be achieved with market purchases to adequately meet the needs of our customers. And the fact is, this does leave our customers vulnerable to high market prices during peak demand times.
What are we doing to protect customers from high energy market prices?
The best hedge against high energy market prices is owned generation resources located in Montana and dedicated to serving our Montana customers.
NorthWestern Energy has been sounding the alarm since 2017 that a changing and volatile energy market means our customers in Montana have too much exposure to the market, risking both reliability and affordability.
NorthWestern Energy is building the 175 megawatt Yellowstone County Generating Station and acquiring an additional share of the Colstrip Plant, for zero purchase price, because the on-demand generation located in Montana will improve our ability to provide reliable energy service at stable prices for our Montana customers.
Proactive planning with system maintenance and investment, securing energy supply and a skilled and dedicated workforce is how NorthWestern Energy delivers reliable, sustainable energy at the most affordable rates for our Montana customers.