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Loser challenges contract selection -- Windy Montana portfolio at risk

A legal battle is brewing over the granting of a 150 MW wind power contract in the US Northwest. The utility's choice of supplier is being challenged by the losing bidder for the project, Minnesota wind developer Navitas Energy. Navitas argues that Northwestern Energy, formerly Montana Power Company, chose a "more expensive, less experienced company over a less expensive, more experienced one" for political reasons. Navitas has filed a brief with Montana state regulators asking to have Northwestern's choice of developer for the 150 MW project overturned. It is also asking for the utility to be forced to re-issue its tender for project bids.

The legal challenge puts the entire of Northwestern's 1150 MW default supply portfolio at risk -- including the more than 10% of wind generation it contains. Navitas is asking the Montana Public Service Commission not to approve the portfolio because of the utility's selection of Montana Wind Harness (MWH) as supplier of the project instead of Navitas. MWH has no track record as a wind project developer. With the Montana electricity market due to fully deregulate next month, approval of the portfolio is vital. "In our ten year history we've never filed any intervention in any kind of public process," says Navitas president Greg Jaunich. "But we thought the activities of Montana Power [Northwestern Energy] in the bidding process was egregious. We now know through public testimony that our company and another should have received the bid."

In its brief, Navitas points out that three months after the contract was awarded to MWH, Northwestern sought a further company to enter the picture as developer and project financier. Ameresco Inc is now 99% owner of the project, which will use Nordex 1.5 MW turbines. The choice can only have been for "political reasons," says Navitas. "That is the only credible explanation for Northwestern's inexplicable decision to select MWH, and for Northwestern's equally odd determination to find a partner for the obviously unqualified bidder it initially selected," the brief says.

If approved, the project could bring a Nordex wind turbine manufacturing plant to the state and other financial benefits. Indeed, construction of a manufacturing facility was a condition of the original contract and lease payments for any turbines placed on state lands were to be used to support schools, according to James Carkulis of Montana Wind Harness (Windpower Monthly, January 2002).

Denies charge

Northwestern's Claudia Rapkoch denies the charge that MWH was selected for political reasons. "Politics had no bearing on our decision. All the projects had their political supporters." In addition, she says, the contract was not signed until the project had solid financing and that was after Ameresco became 99% owner. Nor was the Navitas bid lower until later in the process, Rapokoch says. "At some time Navitas came back with an offer of $28 [per MW]," Rapkoch says. "We weren't comfortable with it and it didn't cause us to change our minds."

MWH bid a fixed $31.65/MW plus $4.50/MWh for ancillary services over a 20 year period. "That's an excellent price," she says. In testimony before the Montana Public Service Commission, two environmental advocacy groups -- Renewables Northwest and the Natural Resources Defense Council -- agreed the price is "an excellent deal for the default supply customers and the state."

They also suggested, however, that if there are concerns MWH will not deliver, the Public Service Commission could require the company to take out a performance bond that would pay for another solicitation if needed. That, they said, would give the losing bidders another chance to supply Montana's default supply customers with wind power and perhaps even lower the cost.

Jaunich says that for now Navitas is taking the high road and asking regulators to assign an arbiter to re-bid the project, but that it may take legal action if needed. He adds that Navitas and another bidder were notified by written correspondence that they had won the bid, but then did not hear anything more from Northwestern.

But Northwestern's Claudia Rapkoch says the utility notified Navitas that it was on the short list of projects, not that it was the bid's winner. In fact, she says, it was primarily negotiating a final contract with Montana Wind Harness. MWH's bid, says Rapkoch, met more of the utility's objectives. It proposed at least three geographically separate sites to obtain better utilisation of available winds, all located near transmission lines, and it came in at a good price.

Project blocked

Meanwhile, the Public Service Commission's stamp of approval on Northwestern's default supply portfolio is one of the few remaining hurdles delaying construction of the 150 MW Montana Wind Harness project. In May, Ameresco announced that wind monitoring near Cut Bank, which is one of three sites where the 115, 1.5 MW Nordex turbines are planned for installation, confirms the site's commercial potential.

"It's better than we thought in terms of velocity and consistency," says Doug Barba of Ameresco. "We also found that our site will generate power at the time that Montanans need it the most. We have the best wind during the daylight hours in the coldest months." Ameresco says it will complete monitoring at two other sites in the next couple of months.

Rapkoch says the contract with Ameresco calls for the project to be on-line no later than the end of next year so that it fits into the company's default supply portfolio for 2003 through 2007. Montana has partially deregulated its electricity industry, requiring retail utilities to divest themselves of generation, but still continue to serve customers who do not want to leave Northwestern's system. The utility has 295,000 customers.

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