Renewable Resource Standard

Summary

Note: H.B. 576 of 2021 repealed this RPS. The information below is presented for informational purposes only. 

Montana’s renewable portfolio standard (RPS), enacted in April 2005 as part of the Montana Renewable Power Production and Rural Economic Development Act, requires public utilities and competitive electricity suppliers serving 50 or more customers to obtain a percentage of their retail electricity sales from eligible renewable resources according to the following schedule:

• 5% for compliance years 2008-2009 (1/1/2008 - 12/31/2009)
• 10% for compliance years 2010-2014 (1/1/2010 - 12/31/2014)
• 15% for compliance year 2015 (1/1/2015 - 12/31/2015) and for each year thereafter

Public utilities that served 50 or fewer customers in the state on December 31, 2021, and competitive electricity suppliers with four or fewer small customers are exempt from the requirements.

Eligible Technologies

Eligible renewable resources include: wind; solar; geothermal; existing hydroelectric projects (10 megawatts or less); certain new hydroelectric projects (up to 15 megawatts installed at an existing reservoir or on an existing irrigation system that did not have hydroelectric generation as of April 16, 2009); landfill or farm-based methane gas; wastewater-treatment gas; low-emission, non-toxic biomass; and fuel cells where hydrogen is produced with renewable fuels, and energy storage technologies (including flywheels, hydroelectric pump storage, batteries, and compressed air) based upon the portion of electricity produced that is attributable to renewable sources. Facilities using these resources must begin operation after January 1, 2005, and must either be located in Montana or located in another state and be delivering electricity into Montana. Two bills in 2013 expanded the RPS to include additional types of projects. S.B. 325 of 2013 allows wood pieces that have been treated with chemical preservatives, such as creosote, pentachlorophenol, or copper-chrome arsenic, and that are used at a facility that has a nameplate capacity of 5 megawatts or less, to qualify. S.B. 45 of 2013 allows expansions to existing hydroelectric projects that result in increased generation capacity to qualify.

Requirements

Utilities and competitive suppliers can meet the standard by entering into long-term purchase contracts for electricity bundled with renewable-energy credits (RECs), by purchasing the RECs separately, or by a combination of both. RECs sold through voluntary utility green power programs may not be used for compliance. Before entering into a long-term contract to purchase RECs, with or without the associated electricity, a utility must petition the PSC to certify that the RECs were produced by an eligible renewable resource.

Montana's RPS includes specific procurement requirements to stimulate rural economic development. The RPS includes provisions for community renewable energy projects, defined as renewable energy projects under 25 megawatts (MW) where local owners have a controlling interest. For compliance year 2012 through compliance year 2014, public utilities* were required to purchase both the renewable-energy credits (RECs) and the electricity output from community renewable-energy projects totaling at least 50 MW in nameplate capacity. For compliance year 2015 and each following year, utilities must purchase both the RECs and the electricity output from community renewable-energy projects totaling at least 75 MW in nameplate capacity. In addition, public utilities must enter into contracts that include a preference for Montana workers.

While cooperative utilities and municipal utilities are generally exempt from these requirements, cooperative and municipal utilities with 5,000 or more customers must implement a renewable-energy standard that recognizes the "intent of the legislature to encourage new renewable-energy production and rural economic development, while taking into consideration the effect of the standard on rates, reliability and financial resources."

Compliance

A utility or competitive supplier unable to comply with the RPS during an annual period, including a three-month grace period, must pay an administrative penalty of $10 per megawatt-hour (MWh) for RECs that the utility failed to procure. Penalty payments may not be recovered in electricity rates. Funds derived from penalties go into the universal low-income energy assistance fund. Alternatively, a utility may petition the PSC for a short-term waiver from full compliance. If a utility or competitive supplier exceeds the standard in any year, it may carry forward the amount by which the standard was exceeded to comply with the standard in either or both of the two subsequent compliance years.

For utilities operating in Montana within the geographic boundaries of the Western Electricity Coordinating Council, all RECs used to comply with the standard must be tracked and verified through the Western Renewable Energy Generation Information System (WREGIS). For public utilities operating in Montana within the geographic boundaries of Midwest Reliability Organization, all RECs used to comply with the standard must be tracked and verified through the Midwest Renewable Energy Tracking System (MRETS).

Cost Mitigation Measures

The law includes cost caps that limit the additional cost utilities must pay for renewable energy. Public utilities that have not restructured are not obligated to purchase eligible renewable electricity if its cost exceeds 15% of the cost of power from any other alternate resource. Cost caps with specific provisions also apply to public utilities that have restructured and competitive suppliers. The law also allows cost recovery from ratepayers for contracts pre-approved by the PSC. Utilities that intend to sign contracts of under 10 years in length are also required to demonstrate to the PSC that the contracts will pass on "lower long-term cost(s)" of meeting the standard to customers. 

Background

Legislation (H.B. 681) enacted in 2007 made competitive electricity suppliers subject to the RPS, as the original law applied only to public utilities. Legislation (S.B. 164) enacted in 2013 exempted public utilities serving 50 or fewer customers from the RPS requirements. In 2014, the Energy and Telecommunications Interim Committee (ETIC) reviewed the RPS in accordance with S.J. 6 passed in 2013. ETIC recommended the standard remain static at 15% for 2015 and beyond. H.B. 20, enacted in 2017, repealed renewable energy credit reporting requirements.

*Competitive electricity suppliers are not subject to the community renewable energy project requirement.