SIOUX FALLS, S.D. and BUTTE, Mont., May 11, 2016 /PRNewswire/ -- NorthWestern Corporation d/b/a NorthWestern Energy (NYSE: NWE) announced it received an Order from the Federal Energy Regulatory Commission (FERC) late yesterday denying its May 2014 request for rehearing. The request for rehearing challenged a September 2012 initial decision from a FERC Administrative Law Judge (ALJ) that addressed cost recovery at NorthWestern's Dave Gates Generating Station (DGGS) that was later summarily affirmed by the FERC. NorthWestern has been recognizing revenue consistent with the ALJ's initial decision and does not anticipate an impact to ongoing earnings in 2016 as a result of the order but we will continue to evaluate the potential for an impairment charge as discussed below. As of March 31, 2016, we have cumulative deferred revenue of approximately $27.3 million plus accrued interest of $3.3 million that is required to be refunded to wholesale customers within 30 days of the order.
"We are obviously extremely disappointed by the decision from FERC," said Vice President and General Counsel Heather Grahame. "We will be appealing this decision to the United States Court of Appeals."
In addition to the quarterly impairment analysis we have been conducting, this order from FERC will require us to once again evaluate whether we can adequately recover the costs associated with DGGS; we have not yet made a final determination.
As of March 31, 2016, the DGGS net property, plant and equipment balance is approximately $159 million. We have used DGGS to provide only regulation service, which is the basis for the cost allocation in our previous state and federal regulatory filings. With the addition of owned hydro generation in November 2014, we are able to shift the utilization of DGGS to additional alternative uses, optimizing operation of the entire portfolio for the benefit of our customers. In support of our biennial electricity supply resource procurement plan that we filed with the Montana Public Service Commission in March 2016, we conducted a portfolio optimization analysis to evaluate options to use DGGS in combination with other generation resources. This analysis indicates DGGS will now provide numerous cost-effective products, all necessary to operate our Montana electricity portfolio, including regulation, load following, peaking services and other ancillary products such as contingency reserves. The cost recovery of any alternative use of DGGS would be evaluated as part of our overall electric portfolio costs included in future rate proceedings and subject to regulatory approval.
About NorthWestern Energy (NYSE: NWE)
NorthWestern Corporation, doing business as NorthWestern Energy, provides electricity and natural gas to approximately 701,000 customers in Montana, South Dakota and Nebraska. More information on NorthWestern Energy is available on the company's Web site at www.northwesternenergy.com.
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SOURCE NorthWestern Corporation