- Associated Press - Monday, February 8, 2016

BILLINGS, Mont. (AP) - A utility serving 26,000 eastern Montana customers scaled back its proposal for a steep rate hike on Monday, just a day before the matter was scheduled to go before state regulators for a public hearing.

Montana-Dakota Utilities Co. planned to file a new application with the Montana Public Service Commission reducing the proposed rate hike from 21 percent to 13.3 percent, spokesman Mark Hanson said.

The change came after the Montana Consumer Counsel and a group representing large electricity customers had objected to the increase.

“This is a fair settlement for the company and our customers,” Hanson said. He added that the smaller rate hike means the utility will be able to take in less revenue than it needs.

The utility has said it needs to cover costs that include its share of $400 million in pollution controls at coal plants in Montana and South Dakota.

A public hearing on the company’s request is scheduled to begin Tuesday before the Public Service Commission at the Dawson County Courthouse in Glendive. It’s expected to last several days.

Commissioners in December rejected an interim increase sought by MDU, saying they needed to study the matter further. A final order is due by March 25.

The 13 percent increase would be phased in over two years and cost residential customers on average $6.38 per month. It would bring in about $7.4 million annually in additional revenue for MDU, Hanson said.

A 21-percent increase would have cost customers $14.80 per month on average and generated about $11.8 million annually.

“It’s a good outcome for customers,” said Dennis Lopach, an attorney for the Consumer Counsel, which negotiated with MDU to lower the increase.

The Consumer Counsel has said previously that MDU’s proposal was excessive and based on flawed projections of how fast its assets would lose value in coming years.

The costs cited by MDU include new pollution controls at power plants in Sidney, Montana, and Big Stone City, South Dakota; a newly constructed $77 million gas plant near Mandan, North Dakota; a $220 million wind farm in North Dakota and two small natural gas plants in Sidney.

PSC Commissioner Kirk Bushman said the five-member panel will look closely at those projects as it considers the rate hike. Bushman said some increase was likely.

“We can’t just say, ‘You can’t raise rates,’” Bushman said. “If they can show under reasonable circumstances they had to build out and invest so much in their infrastructure, by law they’re allowed to recover” those costs from customers.

When the rate increase was first announced last year, it included a fee for some customers who use their own wind or solar power. That provision was dropped under an agreement between MDU and a group known as The Alliance for Solar Choice, which intervened in the case.

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