Rate was set by Public Service Commission
A Calgary-based energy company said Wednesday it won't build a 21-megawatt wind farm in Montana because it won't be paid enough for the power it generates.
The Public Service Commission approved a price of $23.30 per megawatt hour.
TransAlta wanted $43.63 per megawatt hour for the power; Northwestern Energy, which would have purchased it, proposed paying $13.96.
The price discrepancy had gone to the PSC for mediation.
Stacey Hatcher, TransAlta communications manager, said Wednesday the company can't accept the terms of the power purchase agreement awarded for the New Colony wind farm near Martinsdale because the price makes it economically unfeasible.
"As a result, TransAlta will not be proceeding with the project," Hatcher said in a statement. "TransAlta believes it would be extremely challenging, if not impossible for any new qualifying facility projects to be constructed in the state of Montana on the basis of the terms awarded by the commission."
The U.S. Public Utility Regulatory Policies Act of 1978, designed to spur development of smaller renewable energy projects, created a new class of generating facilities called "non-utility generators" or "qualifying facilities" that would receive special rate and regulatory treatment.
Qualifying facilities larger than 3 megawatts require negotiations,
TransAlta is an electricity power generator and wholesale marketing company headquartered Calgary.
It has more than 8,600 megawatts of power generation in Canada, the United States and Australia including power produced at 21 wind farms.
The New Colony project would have led to significant economic development opportunities, Hatcher said.
"In this case, it was quite a bit higher than what we thought was a fair price," said Butch Larcombe, a NorthWestern Energy spokesman.
NorthWestern currently gets 263 megawatts of its power supply from 13 wind farms ranging in size from 9 to 135 megawatts, most of them located in central Montana, Larcombe said.
It owns one of those wind farms, Spion Kop northeast of Raynesford.
NorthWestern has an additional three contracts in which the wind farms have yet to be built.
Once those projects are finished, wind will become the utility's largest source of electricity at 448 megawatts, outpacing coal and hydroelectric, Larcombe said.
That 448 megawatts does not include the New Colony project.
PSC members also reduced the length of the proposed contract from 25 years to 15 years.
Shortening the length of the contract is in line with an effort by commissioners to protect consumers from paying above-market rates in the future, PSC spokesman Chris Puyear said.
New Colony was proposing a 23-megawatt wind farm near Martinsdale in southeastern Meagher County 115 southeast of Great Falls.
That's enough electricity to power 6,900 homes, according to the PSC.
The project would have required $5.4 million in interconnection and transmission-related upgrades, according to the PSC.
Under the agreement approved by the commission, NorthWestern would have paid the cost of transmission-related upgrades on its system, and New Colony would have paid the cost of connecting its wind farm to the grid.
New Colony also would have been required to make an additional $2 million security deposit for upgrades to NorthWestern's 100-kilovolt transmission line between Two Dot and Martinsdale.
TransAlta would have received the $2 million deposit back at the end of the contract, Puyear said.