- [Hannah] Demand for power is surging.

And Montana's largest electric utility says merging with a neighbor will help it meet the moment.

- We need to be larger to actually be able to compete and serve our customers in a growing demand environment.

- [Hannah] Plus, as communities in Montana change, the state's constitution make sure their local governments can change too.

- If you guys don't like the form of government, the type of government that you have, every 10 years we'll give you the opportunity to change that.

Who would've thought?

- From the campuses of Montana State University Bozeman and the University of Montana Missoula, you're watching "Impact," from Montana PBS Reports.

And those stories are straight ahead.

Stay with us.

- [Announcer] Major funding for "Impact" comes from the Greater Montana Foundation, encouraging communication on issues, trends, and values of importance to Montanans.

Funding also comes from viewers like you, who are friends of Montana PBS.

Thank you.

"Impact" is an editorially independent production of Montana PBS Reports.

Coverage decisions are made by our team of Montana-based journalists.

For feedback, questions, or ideas, email us.

Impact@montanapbs.org.

- Welcome to "Impact."

I'm Hannah Kearse.

In August, the state's largest electric utility, NorthWestern Energy, said it plans to combine with a neighbor.

The proposed merger would create a new company that would deliver power and natural gas to more than 2 million customers in eight states.

Montana PBS's Stan Parker sat down with the leader of NorthWestern Energy to talk about the merger and the increasing demand for power that's expected to reshape the industry.

- [Stan] On September 3rd, 1885, Butte residents would find some exciting news in the pages of "The Butte Miner."

The Butte Electric Light Company would run a power line to your house and light up your home beautiful, clean, odorless, electric light and they'd set it all up free of charge.

It is measured by electric meters, the paper reads, so the consumer pays only for what he actually uses.

140 years later, for as much has changed, utilities are still essentially making the same promise.

We'll find investor capital to build the grid and keep it powered if you just pay for the hours on your meter.

The Butte Electric Light Company was an early precursor to the Montana Power Company, which sold its transmission and the distribution business to NorthWestern Energy in 2002.

NorthWestern, now Montana's largest electric and gas utility, is adding its own chapter to this history of corporate consolidation.

In August, it came out with plans to merge with the utility next door, Black Hills Energy.

If regulators approve, the two companies will become one and serve customers in eight states across a huge swath of the middle of the country.

There's no plan to rebrand either unit anytime soon though.

- From Montana's perspective, it should mean very little difference than what they have today.

What the merger allows us to do is be a much larger organization and helps to take advantage of that scale and hopefully ultimately bring lower cost to customers.

But in terms of service, you'll see very little change.

Matter of fact, our intent, at least for the foreseeable future, is we're gonna continue to be NorthWestern Energy, serving customers.

- [Stan] Brian Bird is the president and CEO of NorthWestern, and he's the pick to lead the bigger company.

His counterpart at Black Hills plans to retire.

The utilities have a lot in common.

Both call South Dakota home, with NorthWestern based in Sioux Falls and Black Hills based in Rapid City.

Rapid City will be the HQ for the new entity.

The two utilities also have similar ownership, both largely held by institutional investors that manage money for other people.

So if you have a 401k or other fund with an outfit like Vanguard or BlackRock, as tens of millions of Americans do, chances are you may own a tiny piece of these companies as well.

For now, all of this is just a plan.

They'll have to ask state regulators for permission to complete the merger.

In Montana, it will be up to the Public Service Commission.

State commissions like these play a key role in the industry.

In lengthy proceedings that involve a lot of lawyers representing different interests, utilities have to ask commissioners for permission to do a lot of things.

So the decisions they make can have huge impacts on customers and the company's bottom line.

That's why Bird says it's helpful for utilities to be spread out over different states, so the decisions of any one commission don't have as much sway.

- Yeah, I think right now, we're, you know, 85-ish, 90% Montana.

And if you have a a single bad outcome in a particular outcome, it impacts your performance.

And if you consistently get poor outcomes, it doesn't look good from an investor perspective.

That diversification, where it's not relied upon all solely on one particular jurisdiction, on a going forward basis, even after the merge, Montana's still the largest utility, just over 30%.

But it's not 90%.

And so that diversity from a regulatory perspective is helpful.

That diversity is also, on different aspects too, electricity and gas, they're a much larger gas utility, we're a larger electric utility.

And just from a scale, back to the size aspect, the diversity is helpful.

- Can you give some examples of what bad, or, like, what bad outcomes are?

Like, what is that?

I think that a viewer might not know what you mean by that.

- Yeah, a bad outcome is where, have an authorized rate of return that we could earn.

I think people think it's a guaranteed return.

It is by no means guaranteed.

And ultimately, if you don't get recovery of your costs, all we ask for when we do a rate review is to get recovery of our costs and get a return on the capital that we invest.

That's all we're asking for, at the appropriate return that's agreed upon.

If you don't get that, you earn something much less than your authorized rate of return, more like 7%, when other utilities are earning 9-ish to 10%.

And so investors have choices, and they can go put their money in jurisdictions that give better returns through utilities.

- [Stan] That authorized rate of return he's talking about is a cornerstone of how the industry is set up.

Build infrastructure, get paid a government-approved amount.

- And this made a lot of sense when the industry was getting going more than a hundred years ago because policy makers wanted to expand electricity service.

That was a reasonable public policy goal at the time.

And so they tied the industry's profits to its expansion.

- [Stan] Ari Peskoe leads the Energy Law Initiative at Harvard Law School and studies the industry.

- There have been always been problems with that business model, and one of them is that it doesn't encourage the utility to be more efficient.

Another problem is that we now have competition in a lot of different segments of the industry.

For example, there is a massive industry now for developing new power plants, but the utility has a lot of opportunities, through the regulatory process, to preference its own sources of power even if they're not the cheapest because that's how the utility profits, by building another power plant.

- [Stan] Peskoe is speaking about utilities in general here, not specifically NorthWestern.

But NorthWestern's Montana critics have long said similar things about the company.

Most recently, environmental groups have criticized the company for building a new natural gas plant in Yellowstone County.

- The more of our money they spend, the more they make.

- [Stan] The company says the plant was necessary and is now asking the PSC to divvy up the cost of the plant among its customers.

That whole who pays for what is a big part of the PSC's job.

It's complicated and about to get even more complicated because the industry is on the cusp of a huge increase in demand for power after 20 years of stagnation.

AI infrastructure is a big part of it.

- Before this growth started a couple years ago, we could say that these data centers, which have been part of the backbone of our internet since the beginning, use something like 3 or 4% of the country's electricity.

And the highest level projection I've seen is that this might go to close to 15%, you know, within the decade.

- All of a sudden, things like data centers, and onshoring, and other electrification has shown that that demand's going to increase.

And we're currently, the whole utility industry as a whole, not just NorthWestern, ill prepared for that change.

- [Stan] Byrd says the merger will help the company meet the moment.

- We need to move much faster, and we need to be larger to actually be able to compete and be prepared to serve our customers in a growing demand environment.

- [Stan] So far, NorthWestern is in formal talks to serve three companies that run data centers, Sabey, Atlas, and Quantica.

And there are some eye popping numbers involved here.

Quantica is the biggest and wants to start building a 500 megawatt data center near Billings in 2026, growing to a thousand megawatts by the 2030s.

For comparison, on an average day, NorthWestern serves about 760 megawatts of power.

So where is all this power going to come from?

Data centers will build much of their own.

Quantica is planning a vast solar and wind installation with onsite battery storage, and it hasn't ruled out building other forms of power.

NorthWestern will also be able to serve some data center loads with power from the coal plant in Colstrip.

But Byrd says due largely to regulation, no new generation is in the works, at least in Montana.

So mostly serving these Montana data centers is about the infrastructure build, not the generation.

Peskoe has researched how new infrastructure to serve data centers has played out in other states.

He co-wrote a paper called "Extracting Profits from the Public."

He says Maryland residential customers got saddled with a big tab for a regional grid upgrade.

- What ends up happening is that residential rate payers end up paying for the majority of that 500 million even though it's data centers that were one of the main drivers of this $5 billion expansion.

- I think that there's a lot of people that are worried that, you know, expanding to serve these data centers is gonna end up being paid for by Montana rate payers.

What are you gonna do to ensure that won't happen?

- Yeah, I certainly understand the concerns and there's been concerns raised nationwide about this issue.

One of the issues being a little late for this party, if you will, is ability to understand where, you know, we can do things better.

And I think when people are initially trying to capture data center loads, they may have gave them appropriate incentives, and ultimately that could have impact customers' rates.

These data centers have to pay for what they need.

I ultimately think the infrastructure that they're gonna build could help other customers because we'll be more resilient by having a larger system.

But they have to pay for what they required us to build at the end of the day.

- [Stan] NorthWestern Energy has started a process at the PSC to develop a large load tariff, a process that will develop rates and other rules of the road for serving large load customers like data centers.

- A data center tariff should offer more transparency for the public as compared to the utility just negotiating in secret with each particular data center, then potentially having a series of one-off deals that the public doesn't have any knowledge of.

So I think in general, a tariff is the way to go as long as all of the key terms and conditions are being made public as part of that process and if there's robust participation, as I expect there would be from parties like the state's consumer advocate, from industrial consumers, and other groups that will have an incentive to weigh in and try to make sure that every data center is paying for every penny of the infrastructure that the utility is building to support this growth.

- [Stan] And once again, it will all be up to the PSC to wade through the arguments and balance the interests of the shareholders with the customers.

- We have a Venn diagram.

There's the consumer interest, there's the shareholder interest, and ideally what regulators ought to find is that sweet spot in the middle.

- [Stan] For "Impact," I'm Stan Parker.

- Stan joins us now to talk a little more about his reporting.

Stan, what did you learn about the climate impacts of these developments?

- Well, thanks, Hannah.

Brian Bird says that he thinks that most of the new generation that's gonna happen nationwide will probably come from new gas plants, natural gas plants, which do increase carbon warming emissions.

For NorthWestern Energy's part, its biggest source of carbon emissions is the coal-fired power plant in Colstrip that it shares with a couple of other companies.

And nothing within the merger is going to change the company's plans to keep the plant running until the 2040s.

But Brian Bird does say that the company is still on track to meet its promise of being carbon neutral by 2050.

Some important context on there though.

The United Nations climate action recommendations say businesses should try and reduce their emissions by half by 2030 on their way to zero by 2050, and NorthWestern actually expects its emissions to increase during that timeframe.

- Thanks for your reporting, Stan.

American democracy has often been called an experiment but one that most Americans find more and more frustrating every year.

Here in Montana, the state constitution guarantees that the experiment is ongoing.

Every 10 years, voters can decide to tinker with the forms of local governments.

Montana PBS's Sam Wilson talked to the Montanans who are keeping this experiment alive.

- [Sam] Harlowton has always been the center of Diane Jones' world.

- I was born in the local community hospital, grew up, graduated from high school, married, our kids all graduated from high school here.

Now we have, you know, the next generation who's just coming into the same schools that my husband and I grew up in.

- [Sam] And though she spent parts of her nursing career in Billings, she always found her way back home.

- I know it sounds a little corny, but I really believe in our community.

And that stems from having grown up here but also having worked here in different roles, recognizing how important it is to support the resources that we have to keep people here.

I'm retired.

I loved my career.

But I came back here for good reason because I think this is the best place.

It's the best place in the world to me.

- So when the mayor of Harlowton asked Jones to join the city's local government study commission, she gladly agreed.

- So Susan has done, I think, quite a marvelous job putting together a final report.

And, Susan, do you wanna take it away, 'cause you did some great work?

- [Sam] In 2024, voters here, along with everywhere else in the state, were asked if they wanted to undergo a local government review, basically a chance to peak under the hood of their city, town, or county governments.

- It's a constitutionally mandated review that takes place every 10 years.

And it's an opportunity for the citizens in a local government to vote on whether they want to perform an evaluation or a review of their existing form of government and compare that with alternatives.

If the locals citizens vote yes, then they elect study commissioners, and those commissioners then evaluate the existing form, compare the existing form with alternative forms, and then if they find that there could be an improvement upon the structure, or plan, or the powers of government, they then present that to the voters for their adoption or rejection.

- [Sam] If that sounds like a lot of work, it is.

Not only do the volunteer study commissioners have to become experts in nuanced local government structures, they must then communicate what they've learned to the general public.

To help make all that digestible, Dan Clark and his team at MSU's Local Government Center crisscross to the state, training commissioners and facilitating community discussions.

- Of the 127 municipalities, I've been into and presented trainings in 109 of them.

So I know and understand both the geography of the state and the complexity, but also the cultural and the governing challenges in situations.

- [Sam] Montana is the only state in the country that offers a local government review to its citizens.

In 2024, 12 counties took it on, as did 44 municipalities.

Clark says it's common for people to think that this is their chance to review their elected officials.

- And that's not at all what this is about.

It's really about what sort of powers do we want our local government to have access to as they make decisions on our behalf, and is one, in our situation, better than the other?

And that's much more nuanced than, "I really don't like our mayor," right?

So it has nothing to do about people but everything to do about process.

- [Sam] To get a sense of what the study commission can address, Harlowton offers an example.

The Milwaukee Railroad was once the economic lifeblood of the town, but when the last rail car left the station in 1980, there was little left to support the community.

- I think that the population, when we were really active with the railroad, you know, it was over 2,000.

And now we're at 8-900.

So, you know, over 50% of the population has decreased over the course of a couple decades.

So that made it hard because we did lose a lot of community services and businesses.

And you can tell by looking at our Main Street.

There's a lot of businesses that are no longer in existence.

There was one day that a friend of mine were counting the amount of empty buildings on Main Street, and there was 20, which when I was a kid, that wasn't the case at all.

- [Sam] It was packed.

- It was packed.

- [Sam] If you ask around town, people will say one of the biggest changes after the railroad was abandoned is the class size at the school.

The Harlowton Engineers dropped from a Class B school to Class C. Another difference is that the town council now has trouble keeping commissioners in their seats.

The current city plan mandates that council members live in the ward they represent, a tall order now that the town is smaller, - There's been kind of an attrition of council members.

If they relocated from one area of the community to another, then they were no longer able to be representative of their ward.

And so that's a big deal because we have a hard time keeping enough members on the council.

We need six members, two from each ward at this point.

- [Sam] To address this, Jones and her fellow commissioners are looking into converting three of their city council seats to at-large positions, which can be elected from anywhere in the city.

She hopes this will also enable the town to take care of other longstanding problems.

- There's hot topic issues, I think, that continue to be a challenge, including, how are we keeping up our Main Street?

Are there buildings that are just disintegrating but nobody wants to sell them and holding on to buildings that are of no use?

You know, what can we do ordinance-wise that might make a difference?

And so how we can try to stabilize our council is really, really important.

- [Sam] 80 miles, as the crow flies, southwest of Harlowton, Bozeman is on a different trajectory.

- In 2004, somewhere in there, the population was about, maybe a little more than half of what it is now.

And so you think about what that means.

As the city grows, things change.

- [Sam] All four members of Bozeman's City Commission are elected at-large.

And though the city has ballooned in size, the majority of its representation still comes from one neighborhood, in the old part of town.

- As you grow, you also grow different neighborhoods.

The northwest side of the city is all new construction.

What are the interests of the northwest?

One, they don't have problems with dilapidated housing 'cause it's all relatively new.

They do have, are there walkable neighborhoods?

How near is the nearest grocery store?

How near is the nearest gas station?

And those are what their issues are.

Some of the primary services are in the old parts of town, the library, the swimming pool, all of that.

Well, there's a need and a desire on the northwest side of town to have some of those amenities.

How do you go about doing it?

- And they can do that by creating wards.

So Bozeman might be interested in shifting from at-large to wards, where Harlowton might be thinking, we wanna go from wards to at-large.

And that's what I like about this whole local government review is that it's an experiment, let's try it out.

And for Bozeman, it may have worked for 30 years.

Now let's evaluate it.

And at the end of the day, the voters may decide, no, we're happy with at-large.

- [Sam] That's the sort of experimentation the framers of the 1972 Montana Constitution hoped to inspire when they included the local government review.

They also thought it would encourage public participation in government more broadly.

But as time has gone on, the review has become less popular.

- As I look at the trajectory of the local government review, and the first time in the '70s, it was a hundred percent of the cities and counties participated.

In the '80s, it was 70%-ish.

And those numbers of participating cities, and municipalities, and counties has been declining over time.

And the proposals that have been going before the voters has been declining over time.

- [Sam] In the northeast corner of the state, the town of Nashua was one of the places that voted for the review.

But when it came time to actually do the work of evaluating their government, study commissioners were unable to muster community engagement.

For a town of 300 people with minimal resources, the juice just wasn't worth the squeeze.

- It was disappointing.

After, I don't know, we started in December, January, December, January, February, and in March we decided that we would send out a letter to all the voters in the town that said, come and meet your crew, come and meet us.

Who was voted in?

Where do we meet?

When do we meet?

What's our purpose?

It didn't improve our attendance.

- [Sam] Nashua Study Commission ended in August of 2025, more than a year before the deadline, with no recommendations for changes.

- Once that was decided upon by all three of us, it was an easy choice to start the process to end it.

- [Sam] So, you know, spent basically $4,000 to realize that government is working.

- It's functioning as it's needed, yes, yes.

- [Sam] Despite her experience, Meredith still believes in the process.

- I have never in my life dreamt that a state would have the forethought to say, you know what, if you guys don't like the form of government, the type of government that you have, every 10 years we'll give you the opportunity to change that.

Who would've thought?

- For Diane Jones in Harlowton, it's an opportunity that can't be missed.

And to find out why, we head over to the annual Moose Lodge Hunters Feed, which has been serving chicken fried steaks on the first day of antelope season for longer than anyone can remember.

It's an illustration of the small town spirit hanging on in Harlo where you can still find an extra pair of hands to help open jars of homemade pickled beets.

- [Staff] There you go.

- It's exciting to have opportunities like what has come about with the city commission in that we're able to look at our government structure and say, "Gee, is there something else we could be doing that might give opportunity to help the community build and develop more, that would also provide jobs, and housing, and stability in that way?

And I think that what we're seeing now is that there needs to be a move forward if we're gonna survive as a little community.

- [Sam] For "Impact," I'm Sam Wilson.

- The MSU Local Government Center's website has a list of all counties and towns participating in a local government review.

You can see if yours is on the list by going to montana.edu and searching for local government center in the search box.

That's all we have for this episode of "Impact."

If you have feedback, questions, or story ideas for us, send us an email at impact@montanapbs.org.

I'm Hannah Kearse.

And from all of us here at Montana PBS, thank you for watching.

(lighthearted music) (lighthearted music continues) (lighthearted music continues) - [Announcer] Major funding for "Impact" comes from the Greater Montana Foundation, encouraging communication on issues, trends, and values of importance to Montanans.

Funding also comes from viewers like you, who are friends of Montana PBS.

Thank you.

(lighthearted music)