|By PR Newswire||
|April 17, 2014 06:54 PM EDT||
SIOUX FALLS, S.D., April 17, 2014 /PRNewswire/ -- NorthWestern Corporation d/b/a NorthWestern Energy (NYSE: NWE) today announced that FERC issued an order affirming a FERC Administrative Law Judge's (ALJ) initial decision issued in September 2012 regarding cost allocation at its Dave Gates Generating Station (DGGS).
We operate a transmission system and balancing authority within Montana and are charged with the responsibility of providing safe and reliable electric service to both retail and wholesale customers. Today's order found that a significant portion of DGGS costs could not be allocated to wholesale customers under NorthWestern's proposal. Costs allocated to our retail customers are being recovered and not impacted by this decision.
As previously reported, since receiving the initial decision in 2012, we have recognized revenue consistent with the ALJ's initial decision. As of March 31, 2014 we have approximately $27.0 million of cumulative deferred revenue that is subject to refund as a result of this order. We do not anticipate any incremental negative impact to ongoing earnings. However, we will be required to evaluate the order and our alternatives to determine if an impairment charge on DGGS will be required.
"While we obviously disagree with the decision today, we continue to be legally obligated to provide the balancing service to FERC jurisdictional customers and meet strict reliability criteria or face stiff penalties. This is the only asset we have to meet this obligation and we certainly expect to be reimbursed for the costs incurred and fairly compensated for our investment," said Bob Rowe, President and Chief Executive Offer. "The necessity of the plant has never been in question and, in fact, the parties, including FERC Staff, agreed through stipulation to a total revenue requirement for DGGS. The plant came in nearly $20 million under budget, has performed as intended, and now FERC has decided to deviate from its previously approved costs allocation methodology. One side of FERC has ordered us to meet reliability criteria and another side of FERC has obstructed our ability to recover our costs of providing that service. From where we sit in Montana, this decision appears confiscatory."
We are reviewing the decision and have 30 days to decide if we will pursue our full appellate rights through rehearing to FERC. If unsuccessful on rehearing, we could appeal to a United States Circuit Court of Appeals, which could extend into 2016 or beyond.
Excluding any potential one-time impairment charge as a result of this decision, we continue to affirm our current 2014 earnings guidance of $2.60 - $2.75 per diluted share.
SOURCE NorthWestern Corporation
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