Service Date:  March 29, 2007 

                               DEPARTMENT OF PUBLIC SERVICE REGULATION

                                   BEFORE THE PUBLIC SERVICE COMMISSION

                                                   OF THE STATE OF MONTANA

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DISSENT OF COMMISSIONER KEN TOOLE

 TO FINAL ORDER NO. 6819

            Increasingly, Montana is addressing the impacts of being considered a “play ground” state.  Many Montanans find themselves locked out of their traditional recreational areas because those places have been bought by people who restrict public access.  Places to hunt are getting harder to find as outfitters enter agreements with land owners to reserve prime hunting areas for their wealthy, out-of-state clients.  Access to rivers for fishing is being rationed by permits as fisheries see more and more pressure from hopeful anglers.

            One of the more disturbing aspects of this kind of growth in our state is the presence of people with profound wealth who build opulent, often part-time, residences and then move to insulate themselves from the rest of the community.  In the last several years we have seen intense local controversies surrounding property around Whitefish Lake purchased by the rich and famous including actress Mary Hart and financier Michael Goguen.   In the Bitterroot Valley musician Huey Lewis was part of a group that successfully moved to close a local fishing hole called the Mitchell slough.  Similar stories abound from Livingston to West Glacier.

            Our entire state has seen the impact of this change.  Local planning boards struggle with pressure from growth.  Natural resource agencies struggle with providing fire protection to homes which are built in the urban wild lands.  Long time local residents on fixed incomes struggle to pay escalating property tax bills, and local workers can’t find affordable housing - let alone scrape up the money needed for a down payment to own a home of their own.

            Perhaps one of the more disturbing forms of this economic and social change for many of us who were born here is the “gated” community.  Investor Charles Schwab founded the Stock Farm, an exclusive by-invitation only community just outside of Hamilton.  A more recent entry, and the reason for this dissent, is the Yellowstone Club near Big Sky.

            The Yellowstone Club is the epitome of a high-end gated community.  Business Week reports that to be a member of the Yellowstone Club you need a minimum net worth of $3.5 million and an invitation to join. The fees break down into a $250,000 buy-in and $16,000 a year in dues. Members are required to buy a home site for $1.1 million to $3.2 million. For this outlay of cash members have a private ski area, golf course and numerous other amenities.   In January, Forbes magazine reported that Yellowstone Club founder Tim Blixseth was planning to build the world's most expensive home at the Yellowstone Club.  The cost. . . . $155 million.

            The patient reader is likely asking what all of this has to do with the Montana Public Service Commission and regulated utility rates.  In late January Northwestern Energy (NWE) filed an agreement with the Yellowstone Club with the Commission.  In its cover letter NWE said, “The Agreement embodies a unique electric service arrangement based on the needs of Yellowstone and NWE’s desire to hold its other customers harmless with regard to incremental costs and risks.”

            The agreement provides that the Yellowstone Club will continue to own the distribution system which delivers electricity to its exclusive clientele and NWE will install individual residential meters, read those meters via transmitted usage data, and bill the end user.  It also provides that NWE will bill the end user for the cost of the distribution system owned by the Yellowstone Club, collect that increment, and forward it to the Yellowstone Club. 

            This agreement is unique.  The general practice when a developer subdivides is that NWE assumes responsibility for maintenance and operation of the electric distribution facilities associated with the development.   The apparent reason for this unique arrangement put forth in the cover letter is that the Yellowstone Club prefers to control NWE employees' access to the property for work on the distribution system and to “eliminate the need for monthly intrusions on owners’ property by NWE personnel to read meters.”

            The agreement finds its way to the Commission because the special billing arrangement must be approved by the Commission.  In the Commission work session on this matter, the staff recommended approval of the agreement primarily because the agreement sufficiently protects other ratepayers and the public from potential risks and cost caused by this unique circumstance.  My dissent from the majority is based on several factors.

            First, I am worried about the precedent we set by accommodating this kind of request.  It does not take an overactive imagination to come up with scenarios which could lead to more of these “unique arrangements.”    The reality is that we here in Montana are likely to see more of these gated, exclusive communities and I do not see how setting a precedent of accommodating their exclusionary and elitist restrictions serves the greater public interest.

            Second, creating new systems to accommodate desires of a particular group of customers requires an evaluation of the need for the unique arrangement.  For example, if a group of customers wanted their bill sent to them on a different date or in a larger font one would normally ask the reason for the requested change and evaluate its merit.  Any decision making body in such a circumstance would evaluate the need, and balance that against the time, effort and cost of the accommodation.  As stated above, the need for the requested accommodation appears to be a desire to restrict the presence of NWE employees in this exclusive community.  I find it particularly unpersuasive.

            Finally, I am not sure what is created here.  Essentially, the Yellowstone Club will own a local electricity distribution utility.  Furthermore, that “utility” is unregulated.   Theoretically, there would be no restrictions on the rates it can charge its customers.  In this particular circumstance I don’t have much concern about what the Yellowstone Club might charge its customers.  But, if we were to grant this kind of arrangement, in different circumstances or, if the practice of developers retaining ownership of distribution facilities and charging their customers distribution fees became a common practice, we would certainly want to be able to assure that those rates were just and reasonable.

  Service Date:  March 29, 2007 

                               DEPARTMENT OF PUBLIC SERVICE REGULATION

                                   BEFORE THE PUBLIC SERVICE COMMISSION

                                                   OF THE STATE OF MONTANA

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            FINAL ORDER APPROVING SERVICE AGREEMENT

Introduction

            1.         On January 30, 2007, NorthWestern Energy (NWE) filed with the Montana Public Service Commission (Commission) a service agreement (Agreement) with Yellowstone Development LLC (Yellowstone) and Yellowstone Mountain Club.  Paragraph 8 of the proposed Agreement requires submission of the Agreement to the Commission for its consideration.      

2.         Yellowstone is owner of the Yellowstone Club, a gated community located near Big Sky, Montana.  Currently, the community includes approximately 111 private residences and 30 non-residential facilities.  NWE currently provides electric primary distribution service to Yellowstone through a master meter, billed at the Commission-approved primary distribution rate.

Findings of Fact

3.         The Agreement would govern installation of individual “turtle” meters at the community residences.  Turtle meters are capable of registering usage remotely, i.e., without the need for a meter reader to physically visit the premises.  The turtle meters require installation of a module in the electric meter to enable collection, storage and transmission of meter read data to the utility company.  The turtle meter system also requires proprietary vendor-provided software installed at the utility host computer system to receive the data and process it into a format usable by the utility billing system.  The individual residential customers would be billed for electric service under the applicable Commission-approved tariffs.  Yellowstone would be responsible for any costs incurred by NWE that are beyond metering costs that NWE would normally incur under the related services specified in the applicable Commission-approved tariffs.  The non-residential facilities would be billed for energy and demand consumption registered at the existing master meter, net of the residential energy usage measured through individual meters, under applicable Commission-approved tariffs. 

4.         The Agreement further anticipates NWE providing a billing service under which monthly bills to the community residential customers would include a separate line item reflecting recovery, over time, of Yellowstone’s investment in the community distribution facilities (Facilities Charge).  NWE would collect and remit to Yellowstone Facilities Charge amounts paid each month to NWE by residential customers.  NWE will collect and process Facilities Charge payments made to NWE on behalf of Yellowstone and will, in turn, remit monthly payments to Yellowstone, equal only to the amounts paid each month by end-use customers with respect to the Facilities Charge.  NWE will add a $2.00 per bill fee for this service.  In the event an end-use customer does not make a full payment on their monthly bill, the amount paid will first be applied to the portion pertaining to NWE’s electric service.  NWE will not be responsible for pursuing collection of any delinquent payments related to the Facilities Charge.  

5.         The Agreement also contemplates the possibility of Yellowstone requesting NWE to perform operation and maintenance work on Yellowstone’s owned facilities, construction of new facilities, and/or engineering services on existing and new facilities.  Yellowstone would be responsible for paying NWE for all costs associated with such work.  NWE submitted information reflecting the manner in which the utility calculated the hourly rates reflected in Agreement Exhibit F for operation and maintenance (O&M) service to be performed by NWE for Yellowstone.  The methodology indicates that the contemplated O&M services would be billed at rates which include utility employees’ salaries, fringe benefits, as well as a corporate overhead allocation factor.  It would appear that any work performed by NWE for Yellowstone under Agreement Exhibit F would be fully compensatory and no subsidy would flow from non-Yellowstone customers of NWE should such O&M work be performed and billed at the contemplated rates.   However, the Commission did not independently verify the accuracy of the cost figures NWE provided.  In addition, while the initial term of the Agreement ends December 31, 2008, paragraph 3 allows for extensions. The Commission directs NWE to insure that any O&M services performed for Yellowstone are at all times fully compensatory.

6.  On February 16, 2007, Notice of the filing of the Agreement was issued.  Any interested party was afforded the opportunity to submit comments and/or a request for hearing on the Agreement filing by March 5, 2007.  No comments or requests for hearing were received by the Commission. 

7.         The Commission’s jurisdiction over this matter is provided at Title 69, MCA, specifically, §69-3-301 (requiring every public utility to file with the Commission schedules for any service performed by it) and §69-3-305 MCA (prohibiting the charging for any service performed by the utility that is not reflected in the utility’s filed schedule of rates, tolls and charges).  It would appear that all services contemplated to be performed under the Agreement would be governed by existing, approved NWE tariff provisions save and except for the special billing service that NWE will provide for Yellowstone.  This Order approves the Agreement, specifically the special billing provision contained therein and described in FOF No. 5 above.

Conclusions of Law

8.                  The application for approval of the NWE-Yellowstone service agreement, as described above, and the Agreement itself, as referenced above, are proper in form and have been properly noticed and processed in accordance with all applicable provisions of Title 69, MCA. 

9.                  The Agreement would bring NWE into compliance with §69-3-301 (requiring every public utility to file with the Commission schedules for any service performed by it) and §69-3-305 MCA (prohibiting the charging for any service performed by the utility that is not reflected in the utility’s filed schedule of rates, tolls and charges). 

ORDER

            IT IS HEREBY ORDERED that the proposed NWE-Yellowstone service agreement, as filed and incorporated herein by reference, is approved. 

            Done and dated this 20th day of March, 2007, by a vote of 3-2.   

            BY ORDER OF THE MONTANA PUBLIC SERVICE COMMISSION

                                                __________________________________________

                                                GREG JERGESON, Chairman

                                                __________________________________________

                                                DOUG MOOD, Vice Chairman

                                                __________________________________________

                                                BRAD MOLNAR, Commissioner, Voting to Dissent

                                                __________________________________________

                                                ROBERT H. RANEY, Commissioner

                                                __________________________________________

                                                KEN TOOLE, Commissioner, Voting to Dissent

                                                (Dissent attached)

ATTEST: 

Connie Jones

Commission Secretary

(SEAL)

NOTE:            Any interested party may request the Commission to reconsider this decision.  A motion to reconsider must be filed within ten (10) days.  See ARM 38.2.4806.