NWE
#By April 30, we'll file the report, and in that report, we're instructed to tell them what our plans are.
Just a word about our planning philosophy.
Our goal is long term, least cost, least risk.
It's an iterative plan, updated every several years.
Typically we have action items in terms of resource acquisition of some sort, action items in terms of operational issues, study issues, things like that.
Many of the comments from third parties were from particular advocacy perspectives, and that's entirely appropriate.
We heard comments about the need to consult, which we do, and we agree.
We heard comments about looking to a range of solution.
There were questions about whether or not we had factored in full optimization of the hydro system.
Questions about how we were looking at the shortfall, in relation to peak, being our own peak and not necessarily a system peak.
And questions about whether or not we were making the right assumptions about capacity shortfall, and questions about how we were thinking about timing of the introduction of new assets.
As I mentioned, a question about whether or not the range of options looked at in the plan was too narrow And as I indicated, we've gone out with an RFP.
Of course, the point of an RFP is to test real resources in the market, and to identify that entire range of options.
We think these are actually very good questions.
Of course, we would have liked the opportunity to address those questions, when the plan was filed.
But we're very, very appreciative that we will have the opportunity to discuss each of those with the Commission.
First on the Montana side, we are certainly inviting build transfer options, and the plan does identify values in utility ownership.
We do expect to see that proposal, but we are not ourselves submitting a bid.
The South Dakota plan, they don't file, or they don't release a comment on the plan.
But again, based on the third-party evaluation, which concluded the methodology was reasonable, the conclusions were appropriate, we call that a very good reception.
I cannot and should not speak for the Commission.
We take responsibility for our part of the regulatory relationship.
We respect the Commission and the Commissioners as public servants, and we respect them individually.
That's the approach that we want to take.
We also, and I think this is where your question is going, recognize that our regulators in all three states and at the federal level, but because of the portion of our investment that is in Montana, certainly in Montana, we recognize that their decisions are perhaps more important than anything else, in our ability to invest in serving our customers.
We've got about $4.3 billion of assets, utility assets dedicated to serve our Montana customers.
We are stewards of that.
They are stewards of that as well.
Our responsibility is to treat the Commission with respect, which we do, to provide them as much information as we possibly can, and we are human.
We don't have access to every bit of information they might want, but to do the best job we possibly can.
Beyond that, I'm very ---+
Our approach has been, again, to try to be as forthcoming and constructive as possible.
Where we make mistakes, we want to own that.
I've certainly been in a position to apologize where we have, or where I have made mistakes.
We'll continue to do that.
Couple of background items.
Obviously, Commissioners in our states are elected, and we're just coming out of a campaign season.
So they have all had to take positions, it's particularly a reality in Montana, you have to take positions as part of a campaign.
Currently, we're in a legislative session, and as is usually the case in Montana, there tend to be fairly significant utility-related issues, and the Commission typically is quite involved, advocating its view, as are we.
And again, we've tried to be very respectful and appropriate in how we've advanced our positions.
Third, I mentioned that we had just a fantastic year last year, from a customer satisfaction perspective, and that included in Montana.
But we have had a winter the likes of which we have not seen, starting in late December into January in Montana, closer to what used to be a normal winter and that's a surprise.
One of the challenges of course in the way investor-owned utility rates are set, is you're recovering all those $4.3 billion in primarily ---+ paying for those assets, primarily fixed cost, through volumetric prices.
So as those meters spin more and more, that does have real impact.
And we've tried to communicate to our customers that we understand their situation, try to work with customers individually and just across the board, to manage through that, and that's the approach that we need to take consistently.
Which one is that.
The property tax.
The two areas that the Commission ---+ two of the areas the Commission has been quite interested in are the supply tax tracker on the electric side, and the property tax tracker.
As you know, around the country, tracker mechanisms, either statutory, or in regulation, or by order are very, very common and used for exactly this purpose.
So we obviously strongly support continuation of the trackers.
The tax tracker is important in Montana, simply because the centrally assessed property taxes that we pay are extremely high, and we agree with the Montana Commission's concern about the level of those taxes.
In fact, one of the things that the Commission has ordered us to do is to begin to break out the tax amount on our electric and gas bills, it's essentially a line item.
And that actually adds ---+ it creates customer awareness about that impact, but I think that also adds to customer frustration.
Our ---+ both electric and gas, as you saw this in the deck on the gas side, are significantly below national averages.
That's something we're quite proud of.
But as part of those rates, the tax bill in Montana is significant.
But we do need to be able to track and recover.
It's worth noting that essentially you, as shareholders, have some fairly significant skin in the game, because between rate cases, we only recover 60% of the change in that centrally assessed tax.
Now, I mentioned, we've got a great tax department.
They work very hard every year to manage that Montana tax bill, and ultimately, that is a benefit.
It's a benefit to you, it's a great benefit to our customers, and that frees up other resources to commit to serving customers.
It's a very important mechanism for us, particularly because the impact of Montana property taxes on the Company and on our customers is so great.
It will impact us quite negatively.
<UNK>.
I think what it does is it's certainly likely to accelerate the need for rate cases.
Indeed, same thing.
Both cases.
No.
That's going to depend on the projects, size of the projects, nature of the projects.
But we certainly ---+ and we want to communicate very, very closely with our regulators in all of our jurisdictions, about our plans.
I think just you may be aware moving forward with an RFP is a very small component of our overall needs for this.
Again, we'll have to demonstrate it's in the best interest of customers, as we go through that process.
But primarily here, and you might remember, <UNK>, on previous calls we've always shown in this fifth year a big drop-off in our capital spend.
You may have heard me talk about in the past we're going to try and smooth this out a bit.
But we did decrease a bit, some of the spend in terms of generation, both in South Dakota and Montana and it has moved out a little bit, it's more a function of timing than anything.
That's just the tax adjustment mechanism.
We had a $1.5 million adjustment, which was effectively an amount that was associated with A&G costs that ultimately the Commission felt should be incrementally removed with the removal of Kerr from our profile.
So those costs wouldn't be able to allocated elsewhere.
I think there are always lots of pending open dockets.
I think we've talked about the key Montana dockets.
We have $125 million that's in the plan.
I believe that's approximately $100 million for Montana and $25 million for South Dakota.
I think again, I reiterate the amount of spend we had in South Dakota was also reduced because of the amount of wind that ---+ it's getting more credit, if you will, in the SPP process.
That's reduced the amount of spend in South Dakota.
And also, think about this, that $100 million of spend, because you pushed some items out of 2021 into beyond, that's also why you've had a reduction in spend here, it's more of a timing issue.
To answer your question directly, $ approximately $100 million of Montana spend to $25 million of South Dakota spend.
I think that reduced in this plan, I think we had more than $100 million in Montana in this plan.
One could argue that was either reduced or deferred.
Probably the best way to answer that, <UNK> is, we haven't reduced our $1.3 billion plan here.
The goal for the workshop really is to gain, actually I would say a mutual understanding.
We want to understand much more directly their questions, and we want to be able to answer those questions, as best we can.
At this point there's no resource, no specific resource that we are planning to file a request for approval for.
<UNK>, that all comes into play in our consideration on a going-forward basis.
Takes into consideration rate cases and rate case outcomes on a going forward basis.
It takes into consideration the ability ---+ the amount of cost control we can put in place.
It takes into consideration the growth in terms of these projects, primarily in this plan from the infrastructure standpoint, and the T&D side of our business.
It takes into consideration all of that.
The best that I can say really is our goal very much is to work constructively with the Commission.
I absolutely believe that Chairman Johnson has the same goal.
Beyond that, I really can't speak for the Commission.
We respect the office, respect the Commission.
I'd add too, <UNK>, a lot of the questions asked today were questions that would be great questions for the Commissioners themselves.
We can't answer them.
Thank you very much for the good discussion.
We hope you have a great weekend, look forward to seeing many of you in person, and visiting with most of you next quarter.
