by Nick Fitzmaurice
On December 24, the Montana Public Service Commission (PSC) quietly released its final order approving an increase to NorthWestern Energy’s electric and gas utility rates. Following the PSC’s approval of a 28% increase to residential electricity rates in October 2023, this recent decision permanently increases residential electric base rates by about 17%. This increase results in an approximately 12% overall increase to residential electric bills compared to bills in July 2024 when NorthWestern originally filed its application. Commissioners voted on many of the issues in this rate case on November 19, but then extended the deadline for issuing a final order, without ever holding a vote on the entire final order.
Since NorthWestern implemented interim rate increases beginning in May 2025 (and it has overcharged customers for its newest gas plant near Laurel as a part of those interim rates), the outcome of this rate case leaves customers with a short-term partial refund and relative decrease to rates compared to those paid throughout the summer and fall. However, don’t be fooled by NorthWestern’s and the PSC’s spins, because the overall impact of this rate case is a large increase to customer bills.
The most contested issue in this rate case was whether and how much NorthWestern could charge customers for its Yellowstone County Generating Station (YCGS) methane gas plant, an expensive boondoggle near Laurel. Originally contemplated in the utility’s defective 2019 Integrated Resource Plan (IRP), YCGS has been controversial since the beginning.
PSC staff pointed to countless flaws in NorthWestern’s decision to build YCGS throughout the process, beginning in the 2019 IRP, persisting through its request for proposals that selected YCGS, and all through its construction with unjustified risks and cost overruns (not to mention that two of the 18 units at YCGS didn’t come online with the rest of the plant). Staff concluded and Commissioners affirmed that the selection and construction of YCGS was misguided.
However, rather than preventing NorthWestern from overcharging customers for YCGS, PSC staff recommended that the Commission only “reduce NorthWestern’s proposed $287 million YCGS rate base, associated with 16 engines in use, to $227.7 million.” Then, the PSC voted to increase that number by an arbitrary $18.36 million for litigation associated with NorthWestern’s illegal air permit during the construction of the plant, even though NorthWestern failed to provide documentation to back up these costs.
The PSC also awarded NorthWestern with a hefty 9.65% return on equity for its investment, while variable expenses for the plant (predominantly gas fuel) will be passed straight to ratepayers throughout the plant’s projected 33-year life, currently estimated at upwards of $35 million per year. And this doesn’t account for future investments to maintain the plant and the potential for gas prices to rise in the future.
While the PSC’s decision sends a signal to NorthWestern Energy that its process for choosing and constructing YCGS was deeply flawed, the plant is now built and operating, and Montanans will be forced to pay the inflated price for decades.
However, perhaps no flaw was as significant as the fact that the PSC’s final decision completely ignored climate change, despite MEIC’s extensive testimony on the relevance of climate change in this proceeding.
Earthjustice, on behalf of MEIC and our partner organizations, filed a motion for reconsideration of the PSC’s final order on January 16. We detailed how NorthWestern should not be allowed to charge customers for any costs associated with YCGS and that climate change must be considered in the PSC’s decision, among other issues. As of this writing, the PSC had waived its deadline for responding to motions for reconsideration, leaving MEIC’s motion still pending. Should the PSC deny the motion, a legal challenge is possible.
Watch Nick’s video explaining NorthWestern’s rising rates below and on our YouTube channel:
This article was published in the March 2026 issue of Down To Earth.
