NW Energy’s rate increase prompts tax increase in Missoula’s lighting districts

Martin Kidston

(Missoula Current) While households work to cover a 19% rate increase from NorthWestern Energy, the City of Missoula also is facing rising electrical costs, and a portion of that will be passed on to residents within the city's 52 street lighting districts.

“The largest cost in the street lighting district is power, and NorthWestern Energy requested a very large power increase,” said Claire Trimble, the city's senior deputy clerk. “We're anticipating at least a 19% increase in the cost of power for the street lighting district. It's very significant.”

The City Council on Wednesday approved a resolution to levy and assess additional taxes within each street lighting district. In doing so, it attempted to offset NorthWestern Energy's rate increase as much as possible, according to Trimble.

In 2021, the city's old street bulbs were replaced with new LED lighting, resulting in $50,000 in energy savings. The city applied half of that savings in FY23 and will apply the second half this year to offset a portion of rising electrical costs.

The city also will apply $34,000 from the Road District and will transfer another $75,000 from an existing fund, both intended to offset skyrocketing electricity costs. In the end, the city has whittled NorthWestern Energy's 19% rate increase down to a 6% tax increase within the lighting district.

“It's a significant increase, and this is going to be a significant impact on our community,” said council member Gwen Jones. “The good news is that because we have some fund balance and savings from the LED conversion, the city can help mitigate that tax increase for the lighting district. The bad news is, our savings is going to be eaten up by (Northwestern Energy's) increase.”

Controversial rate increase

The all-Republican Montana Public Service Commission last fall approved what some have deemed a “historic” rate increase for NorthWestern Energy.

The commission regulates utilities in the state and is charged with ensuring private companies get reasonable returns while customers pay rates that are considered fair. NorthWestern's original rate request was actually higher than what the PSC approved as a temporary increase pending further hearings.

“NorthWestern has received authority from the Montana Public Service Commission for a rate increase of 19% on residential electric rates while they present their rate case to the commission,” said City Clerk Marty Rehbein. “This has been granted by the PSC. It isn't anything the City of Missoula has control over. It belongs in the hands of a different elected body.”

Last year's street-lighting bill in Missoula reached $342,000. With $11,500 in administrative support fees and NorthWestern's 19% rate increase, which amounts to more than $65,000, this year's bill has climbed to $419,000.

With the city's effort to offset the cost, the bill passed on to taxpayers in FY24 stands at $285,600. That equates to a 6% tax increase on the lighting district.

Council member Heidi West said NorthWestern's rate increase was predictable, and it effectively wiped out any savings expected to come from converting to LED lights. But in ways, she added, Missoula is lucky, as other cities are still burning incandescent lights which consume more energy.

“Missoula, Billings and Bozeman were the three communities phasing the LED lights in first. The rest of the state, especially the smaller communities are lagging,” West said. “We're lucky because we have more efficient lights and are better able to buffer this increase in rates. Smaller communities that still have archaic infrastructure are going to be doubly hit.”