Sioux Falls, SD-based NorthWestern Corp., an energy holding company with gas and electric utilities in Montana and surrounding states, is looking to buy more natural gas reserves during the coming decade, CEO Bob Rowe told financial analysts on a second quarter earnings conference call last Thursday.
While refusing to identify potential reserves for which it is now negotiating, Rowe said that Northwestern is "actively looking at opportunities that would bring on incremental and relatively small additions over time." He said those added reserves would be "layered in" on top of existing supply contracts.
"We're trying to transition from natural gas being a pass-through [fuel purchase] expense into a rate case supply with earnings," Rowe said.
A former member of the Montana Public Service Commission (PSC), Rowe said there is "strong support" in Montana for utility-owned resources, "given the [ill-fated] experience the state had with its deregulation experiment. That's reflected in legislation on the electric side, and on the gas side, reflected several years ago in good, forward-looking decisions from the PSC [related to coal- and gas-fired power plants, Colstrip and Mill Creek].
"In Montana we're in a pretty unique situation as a utility looking at moving from pure purchases to much bigger ownership of resources."
Rowe said NorthWestern is targeting proven reserves in its current negotiations. He was not specific, however, about volumes. Instead, Rowe went back in history to the Montana Power Co., whose previous gas and electric distribution systems NorthWestern now owns.
"Montana Power typically had about 50% of its overall gas demand met from [utility-]owned resources," Rowe said. "We're looking at projects substantially smaller than that. I can't really discuss specific projects or dollar amounts. We're taking a very cautious approach, but over time we would hope to see a gradual transition from pass-through to utility-owned supply.
"Given the anticipated future role of gas-fired generation, we see owning reserves as another attractive way to add some price stability to our electric customers."
Rowe said NorthWestern's participation in the natural gas wholesale market will be ongoing from year to year.
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