NorthWestern Energy Group Inc
For the period ended Sep 30, 2024. Filed Oct 29, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 29, 2024
NWE$82.73+0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-31.
0001993004-24-000072
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-29.
0001993004-24-000102
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 139 previous paragraphs and 143 current paragraphs.
89 unchanged; 42 reworded; 12 added; 7 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 30 previous and 30 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
Consolidated net income for the three months ended September 30, 2024 was $46.8 million as compared with $29.3 million for the same period in 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, electric retail volumes, Montana property tax tracker collections, lower non-recoverable Montana electric supply costs, and an income tax benefit from a change to the gas repairs safe harbor method. These were offset in part by natural gas retail volumes, depreciation, operating, administrative and general costs, and interest expense.
Current report
Our filing included a request for interim base rates to be effective October 1, 2024. Implementation of interim base rates, if any, has been delayed beyond our requested effective date as the MPSC has not yet made a decision on the interim rate request.
Current report
The MPSC has developed its procedural schedule for our rate review request including a hearing scheduled to commence on April 22, 2025. If a final order is not received by May 23, 2025, which is 270 days from acceptance of our filing, we intend to implement, as permitted by the MPSC regulations, our requested rates, which will be subject to refund, until a final order is received.
Current report
Regional Transmission Development Activities
Current report
In August 2024, the U.S. Department of Energy awarded a $700.0 million grant through the Grid Resilience and Innovation Partnership (GRIP) program to advance the North Plains Connector (NPC) Consortium project. The 415-mile, high-voltage direct-current transmission line is intended to connect Montana's Colstrip substation, of which we are the operator and a joint owner, to central North Dakota, bridging the eastern and western U.S. energy grids. The NPC Consortium includes potential upgrades to our jointly owned Colstrip Transmission System and $70.0 million of the award is earmarked for the Colstrip Transmission System Upgrade. The NPC project, estimated to be a $3.6 billion investment, aims to enhance grid reliability, support renewable energy integration, and provide additional capacity across multiple states. We collaborated with Grid United, the Montana Department of Commerce, and other regional utilities on the successful GRIP grant application. The project is a critical infrastructure investment that aligns with our commitment to providing reliable and affordable energy to our customers while also supporting broader grid resilience efforts in the region. In addition to the Colstrip Transmission System Upgrade, we are considering an investment in NPC and are engaged in regional transmission development activities.
Current report
Consolidated net income for the three months ended September 30, 2024 was $46.8 million as compared with $29.3 million for the same period in 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, electric retail volumes, Montana property tax tracker collections, lower non-recoverable Montana electric supply costs, and a income tax benefit from a change to the gas repairs safe harbor method. These were offset in part by natural gas retail volumes, depreciation, operating, administrative and general costs, and interest expense.
Current report
Consolidated income tax benefit was $3.2 million for the three months ended September 30, 2024 as compared to income tax expense of $1.7 million for the same period of 2023. Our effective tax rate for the three months ended September 30, 2024 was (7.3)% as compared with 5.5% for the same period in 2023. As further discussed in Note 3 - Income Taxes, during the third quarter of 2024 we filed a tax accounting method change with the IRS consistent with the guidance for natural gas transmission and distribution property. This resulted in an income tax benefit of $7.0 million during the three months ended September 30, 2024, related to repair costs that were previously capitalized for tax purposes in the 2022 and prior tax years.
Current report
Consolidated net income for the nine months ended September 30, 2024 was $143.6 million as compared with $111.0 million for the same period in 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, electric retail volumes, and an income tax benefit from a change to the gas repairs safe harbor method. These were offset in part by non-recoverable Montana electric supply costs, a less favorable QF liability adjustment in the current year, natural gas retail volumes, depreciation, operating, administrative and general costs, and interest expense.
Current report
(1) In the fourth quarter of 2023, upon receiving the final valuation reports from the Montana Department of Revenue, we recorded a significant reduction in property tax expense. Accordingly, we do not anticipate this year-to-date favorable change to Utility Margin to continue on a full year basis.
Current report
(2) Non-GAAP financial measure. See “Non-GAAP Financial Measure” above.
Current report
Under the PCCAM, net supply costs higher or lower than the PCCAM base rate (PCCAM Base) (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the three months ended September 30, 2024, we over-collected supply costs of $5.9 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $0.7 million (10 percent of the PCCAM Base cost variance). For the three months ended September 30, 2023, we over-collected supply costs of $1.0 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $0.1 million.
Current report
Lower retail volumes were driven by unfavorable weather in Montana partly offset by customer growth in all jurisdictions.
Removed paragraphs (7)
Previous report
Consolidated net income for the three months ended June 30, 2024 was $31.7 million as compared with $19.1 million for the same period in 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, and electric and natural gas retail volumes. These were offset in part by a less favorable QF liability adjustment in the current year, non-recoverable Montana electric supply costs, depreciation, operating, administrative and general costs, and interest expense.
Previous report
Consolidated net income for the three months ended June 30, 2024 was $31.7 million as compared with $19.1 million for the same period in 2023. This increase was primarily due to new base rates in Montana and South Dakota , electric transmission revenues, Montana property tax tracker collections, and electric and natural gas retail volumes. These were offset in part by a less favorable QF liability adjustment in the current year, non-recoverable Montana electric supply costs, depreciation, operating, administrative and general costs, and interest expense.
Previous report
The less favorable adjustment to our electric QF liability (unrecoverable costs associated with contracts covered by the Public Utility Regulatory Policies Act of 1978 (PURPA) as part of a 2002 stipulation with the MPSC and other parties) reflects a $0.8 million gain in 2024, as compared with a $5.0 million gain for the same period in 2023, due to a favorable adjustment in the prior year, decreasing the QF liability by $4.2 million, reflecting annual actual contract price escalation for the 2023-2024 contract year, which was less than previously estimated. The 2023-2024 contract year was the last year of the contract that contains variable pricing terms.
Previous report
Consolidated income tax expense was $4.2 million for the three months ended June 30, 2024 as compared to $2.1 million for the same period of 2023. Our effective tax rate for the three months ended June 30, 2024 was 11.8% as compared with 10.1% for the same period in 2023.
Previous report
Consolidated net income for the six months ended June 30, 2024 was $96.7 million as compared with $81.7 million for the same period in 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, and Montana property tax tracker collections. These were offset in part by non-recoverable Montana electric supply costs, a less favorable QF liability adjustment in the current year, electric and natural gas retail volumes, depreciation, operating, administrative and general costs, and interest expense.
Previous report
The less favorable adjustment to our electric QF liability (unrecoverable costs associated with PURPA as part of a 2002 stipulation with the MPSC and other parties) reflects a $0.8 million gain in 2024, as compared with a $5.0 million gain for the same period in 2023, as further explained above in the consolidated results of operations for the three months ended June 30, 2024.
Previous report
Under the PCCAM, net supply costs higher or lower than the PCCAM Base (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the three months ended June 30, 2024, we over-collected supply costs of $11.0 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $1.2 million (10 percent of the PCCAM Base cost variance). For the three months ended June 30, 2023, we over-collected supply costs of $18.9 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $2.1 million.
Reworded paragraphs (42)
Previous wording
As you read this discussion and analysis, refer to our Condensed Consolidated Statements of Income, which present the results of our operations for the three and six months ended June 30, 2024 and 2023.
Current wording
As you read this discussion and analysis, refer to our Condensed Consolidated Statements of Income, which present the results of our operations for the three and nine months ended September 30, 2024 and 2023.
Previous wording
HOW WE PERFORMED AGAINST OUR SECOND QUARTER 2023 RESULTS
Current wording
HOW WE PERFORMED AGAINST OUR THIRD QUARTER 2023 RESULTS
Previous wording
Construction of the new generation facility continues to progress and we expect the plant to be in service during the third quarter of 2024. The lawsuit challenging the Yellowstone County Generating Station (YCGS) air quality permit, which required us to suspend construction activities for a period of time, as well as additional related legal and construction challenges, delayed the project timing and have increased costs. As of June 30, 2024, total costs of approximately $288.9 million have been incurred, with expected total costs of approximately $310.0 million to $320.0 million. See Note 10 - Commitments and
Current wording
Construction of the new generation facility was substantially completed and the plant placed in service in October 2024. The lawsuit challenging the YCGS air quality permit, which required us to suspend construction activities for a period of time, as well as additional related legal and construction challenges, delayed the project timing and have increased costs. As of September 30, 2024, total costs of approximately $305.6 million have been incurred, with expected total costs of approximately
Previous wording
Contingencies to the Condensed Consolidated Financial Statements included herein for additional information regarding legal challenges impacting YCGS.
Current wording
$310.0 million to $320.0 million. See Note 10 - Commitments and Contingencies to the Condensed Consolidated Financial Statements included herein for additional information regarding legal challenges impacting YCGS.
Previous wording
Montana Rate Review -On July 10, 2024, we filed a Montana electric and natural gas rate review with the MPSC. The filing requests a base rate annual revenue increase of $156.5 million ($69.4 million net with Property Tax and PCCAM tracker adjustments) for electric and $28.6 million for natural gas. Our request is based on a return on equity of 10.80 percent with a capital structure including 46.81 percent equity, and forecasted 2024 electric and natural gas rate base of $3.45 billion and $731.9 million, respectively. The electric rate base investment includes the 175-megawatt natural gas-fired Yellowstone County Generating Station, which is expected to be in service during the third quarter of 2024. We requested interim base rates to be effective October 1, 2024.
Current wording
Montana Rate Review -In July 2024, we filed a Montana electric and natural gas rate review with the MPSC. The filing requests a base rate annual revenue increase of $156.5 million ($69.4 million net with Property Tax and PCCAM tracker adjustments) for electric and $28.6 million for natural gas. Our request is based on a return on equity of 10.80 percent with a capital structure including 46.81 percent equity, and forecasted 2024 electric and natural gas rate base of $3.45 billion and $731.9 million, respectively. The electric rate base investment includes the 175-megawatt natural gas-fired Yellowstone County Generating Station, which was placed in service in October 2024.
Previous wording
South Dakota Natural Gas Rate Review -On June 21, 2024, we filed a natural gas rate review with the South Dakota Public Utilities Commission. The filing requests a base rate annual revenue increase of $6.0 million. Our request is based on a return on equity of 10.70 percent, a capital structure including 53.13 percent equity, and rate base of $95.6 million. If a final order is not received by December 21, 2024, interim base rates may go into effect.
Current wording
South Dakota Natural Gas Rate Review -In June 2024, we filed a natural gas rate review with the South Dakota Public Utilities Commission. The filing requests a base rate annual revenue increase of $6.0 million. Our request is based on a return on equity of 10.70 percent, a capital structure including 53.13 percent equity, and rate base of $95.6 million. If a final order is not received by December 21, 2024, interim base rates may go into effect.
Previous wording
Nebraska Natural Gas Rate Review -On June 6, 2024, we filed a natural gas rate review with the Nebraska Public Service Commission. The filing requests a base rate annual revenue increase of $3.6 million. Our request is based on a return on equity of 10.70 percent, a capital structure including 53.13 percent equity, and rate base of $47.4 million. Interim base rates are not anticipated to be implemented prior to October 1, 2024.
Current wording
Nebraska Natural Gas Rate Review -In June 2024, we filed a natural gas rate review with the NPSC. The filing requests a base rate annual revenue increase of $3.6 million. Our request is based on a return on equity of 10.70 percent, a capital structure including 53.13 percent equity, and rate base of $47.4 million. Interim rates, which increased base natural gas rates $2.3 million, were implemented on October 1, 2024. Interim rates will remain in effect on a refundable basis until the NPSC issues a final order.
Previous wording
On April 25, 2024, the EPA released final rules related to GHG emission standards (GHG Rules) for existing coal-fired facilities and new coal and natural gas-fired facilities as well as final rules strengthening the MATS requirements (MATS Rules). Compliance with the rules will require expensive upgrades at Colstrip Units 3 and 4 with proposed compliance dates that may not be achievable and / or require technology that is unproven, resulting in significant impacts to costs of the facilities. The final MATS and GHG Rules require compliance as early as 2027 and 2032, respectively. See Note 10- Commitments and Contingencies to the Condensed Consolidated Financial Statements included herein for additional information regarding these rules.
Current wording
On April 25, 2024, the EPA released GHG Rules for existing coal-fired facilities and new coal and natural gas-fired facilities as well as MATS Rules. Compliance with the rules will require expensive upgrades at Colstrip Units 3 and 4 with proposed compliance dates that may not be achievable and / or require technology that is unproven, resulting in significant impacts to costs of the facilities. The final MATS and GHG Rules require compliance as early as 2027 and 2032, respectively. See Note 10 - Commitments and Contingencies to the Condensed Consolidated Financial Statements included herein for additional information regarding these rules.
Previous wording
On July 30, 2024, we entered into a definitive agreement (the Agreement) with Puget Sound Energy (Puget) to acquire Puget's 25 percent interest in each of Units 3 and 4 (collectively representing 370 megawatts) at the Colstrip Generating Station for $0. The acquisition would be effective December 31, 2025, subject to the satisfaction of the closing conditions contained within the Agreement. Under the terms of the Agreement, we will be responsible for operating costs starting on January 1, 2026; while Puget will retain responsibility for its pre-closing share of environmental and pension liabilities attributed to events or conditions existing prior to the closing of the transaction and for any future decommission and demolition costs associated with the existing facilities that comprise Puget's interest. The Agreement is subject to customary conditions and approvals, including approval from the FERC.
Current wording
On July 30, 2024, we entered into a definitive agreement (the Agreement) with Puget Sound Energy (Puget) to acquire Puget's 25 percent interest in each of Units 3 and 4 (collectively representing 370 megawatts) at the Colstrip Generating Station for $0. The acquisition would be effective December 31, 2025, subject to the satisfaction of the closing conditions contained within the Agreement. Under the terms of the Agreement, we will be responsible for operating costs starting on January 1, 2026; while Puget will retain responsibility for its pre-closing share of environmental and pension liabilities attributed to events or conditions existing prior to the closing of the transaction and for any future decommission and demolition costs associated with the existing facilities that comprise Puget's interest. The Agreement is subject to customary conditions and approvals. The ultimate amount of Puget's ownership interest we acquire is contingent on a right-of-first-refusal held by other Colstrip owners which, if exercised prior to expiration in fourth quarter 2024, would reduce our acquired interest proportionately.
Previous wording
Acquisition of Puget’s ownership interest, in addition to the previously disclosed acquisition of Avista’s 15 percent interest in each of Colstrip Units 3 and 4 (collectively representing 222 megawatts), will result in our ownership of 55 percent of the facility with the ability to guide operating and maintenance investments. This provides capacity to help us meet our obligation to provide reliable and cost effective power to our customers in Montana, while allowing opportunity for us to identify and plan for newer lower or no-carbon technologies in the future.
Current wording
Acquisition of Puget’s entire ownership interest, in addition to the previously disclosed acquisition of Avista’s 15 percent interest in each of Colstrip Units 3 and 4 (collectively representing 222 megawatts), would result in our ownership of 55 percent of the facility with the ability to guide operating and maintenance investments. This provides capacity to help us meet our obligation to provide reliable and cost effective power to our customers in Montana, while allowing opportunity for us to identify and plan for newer lower or no-carbon technologies in the future.
Previous wording
Consolidated gross margin for the six months ended June 30, 2024 was $235.4 million as compared with $206.4 million in 2023, an increase of $29.0 million, or 14.1 percent. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, and Montana property tax tracker collections. These were offset in part by non-recoverable Montana electric supply costs, a less favorable QF liability adjustment in the current year, electric and natural gas retail volumes, depreciation, and operating and maintenance costs.
Current wording
Consolidated gross margin for the three months ended September 30, 2024 was $102.8 million as compared with $83.5 million in 2023, an increase of $19.3 million, or 23.1 percent. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, electric retail volumes, Montana property tax tracker collections, and lower non-recoverable Montana electric supply costs. These were offset in part by natural gas retail volumes, depreciation, and operating and maintenance costs.
Previous wording
Consolidated utility margin for the three months ended June 30, 2024 was $243.4 million as compared with $222.9 million for the same period in 2023, an increase of $20.5 million, or 9.2 percent. Primary components of the change in utility margin include the following (in millions):
Current wording
Consolidated utility margin for the three months ended September 30, 2024 was $257.3 million as compared with $232.2 million for the same period in 2023, an increase of $25.1 million, or 10.8 percent. Primary components of the change in utility margin include the following (in millions):
Previous wording
Higher electric retail volumes were driven by favorable weather in Montana impacting residential demand, higher industrial demand, and customer growth in all jurisdictions, partly offset by unfavorable weather in South Dakota impacting residential demand and lower commercial demand. Higher natural gas retail volumes were driven by favorable weather in Montana and customer growth, partly offset by unfavorable weather in South Dakota and Nebraska.
Current wording
Higher electric retail volumes were driven by favorable weather in Montana impacting residential demand, higher commercial and industrial demand, and customer growth in all jurisdictions, partly offset by unfavorable weather in South Dakota impacting residential demand. Lower natural gas retail volumes were driven by unfavorable weather in Montana partly offset by customer growth in all jurisdictions.
Previous wording
Under the PCCAM, net supply costs higher or lower than the PCCAM base rate (PCCAM Base) (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the three months ended June 30, 2024, we over-collected supply costs of $11.0 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $1.2 million (10 percent of the PCCAM Base cost variance). For the three months ended June 30, 2023, we over-collected supply costs of $18.9 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $2.1 million.
Current wording
Under the PCCAM, net supply costs higher or lower than the PCCAM base rate (PCCAM Base) (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the three months ended September 30, 2024, we over-collected supply costs of $5.9 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $0.7 million (10 percent of the PCCAM Base cost variance). For the three months ended September 30, 2023, we over-collected supply costs of $1.0 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $0.1 million.
Previous wording
Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $181.9 million for the three months ended June 30, 2024, as compared with $177.3 million for the three months ended June 30, 2023. Primary components of the change include the following (in millions):
Current wording
Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $189.4 million for the three months ended September 30, 2024, as compared with $176.6 million for the three months ended September 30, 2023. Primary components of the change include the following (in millions):
Previous wording
Consolidated operating income for the six months ended June 30, 2024 was $163.7 million as compared with $141.7 million in the same period of 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, and Montana property tax tracker collections. These were offset in part by non-recoverable Montana electric supply costs, a less favorable QF liability adjustment in the current year, electric and natural gas retail volumes, depreciation, and operating, administrative and general costs.
Current wording
Consolidated operating income for the three months ended September 30, 2024 was $67.9 million as compared with $55.6 million in the same period of 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, electric retail volumes, Montana property tax tracker collections, and lower non-recoverable Montana electric supply costs. These were offset in part by natural gas retail volumes, depreciation, operating, and administrative and general expenses.
Previous wording
Consolidated interest expense was $31.9 million for the three months ended June 30, 2024 as compared with $28.4 million for the same period of 2023. This increase was due to higher borrowings and interest rates, partly offset by lower interest on our revolving credit facilities and higher capitalization of Allowance for Funds Used During Construction (AFUDC).
Current wording
Consolidated interest expense was $33.4 million for the three months ended September 30, 2024 as compared with $28.7 million for the same period of 2023. This increase was due to higher borrowings and interest rates, partly offset by higher capitalization of Allowance for Funds Used During Construction (AFUDC).
Previous wording
Consolidated other income was $6.2 million for the three months ended June 30, 2024 as compared with $4.1 million for the same period of 2023. This increase was primarily due to higher capitalization of AFUDC and a decrease in the non-service component of pension expense.
Current wording
Consolidated other income was $9.1 million for the three months ended September 30, 2024 as compared with $4.1 million for the same period of 2023. This increase was primarily due to higher capitalization of AFUDC, a decrease in the non-service component of pension expense, and an increase in the value of deferred shares held in trust for deferred compensation.
Previous wording
Consolidated gross margin for the three months ended June 30, 2024 was $92.8 million as compared with $75.5 million in 2023, an increase of $17.3 million, or 22.9 percent. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, and electric and natural gas retail volumes. These were offset in part by a less favorable QF liability adjustment in the current year, non-recoverable Montana electric supply costs, depreciation, and operating and maintenance costs.
Current wording
Consolidated gross margin for the nine months ended September 30, 2024 was $338.3 million as compared with $289.8 million in 2023, an increase of $48.5 million, or 16.7 percent. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, and electric retail volumes. These were offset in part by non-recoverable Montana electric supply costs, a less favorable QF liability adjustment in the current year, natural gas retail volumes, depreciation, and operating and maintenance costs.
Previous wording
Consolidated utility margin for the six months ended June 30, 2024 was $544.1 million as compared with $512.0 million for the same period in 2023, an increase of $32.1 million, or 6.3 percent. Primary components of the change in utility margin include the following (in millions):
Current wording
Consolidated utility margin for the nine months ended September 30, 2024 was $801.3 million as compared with $744.1 million for the same period in 2023, an increase of $57.2 million, or 7.7 percent. Primary components of the change in utility margin include the following (in millions):
Previous wording
Under the PCCAM, net supply costs higher or lower than the PCCAM Base (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the six months ended June 30, 2024, we under-collected supply costs of $16.1 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $1.8 million (10 percent of the PCCAM Base cost variance). For the six months ended June 30, 2023, we over-collected supply costs of $23.4 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $2.6 million.
Current wording
Under the PCCAM, net supply costs higher or lower than the PCCAM Base (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the nine months ended September 30, 2024, we under-collected supply costs of $10.1 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $1.2 million (10 percent of the PCCAM Base cost variance). For the nine months ended September 30, 2023, we over-collected supply costs of $23.5 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $2.6 million.
Previous wording
Electric retail volume impact was unfavorable as lower residential usage, due to unfavorable weather, and lower commercial demand, was partly offset by higher industrial demand and customer growth. Lower natural gas retail volumes were driven by unfavorable weather in all jurisdictions partly offset by customer growth.
Current wording
Electric retail volume impact was favorable due to higher residential usage in Montana due to favorable weather, higher industrial volumes, and customer growth, partly offset by lower residential usage due to unfavorable weather in South Dakota, and lower commercial demand. Lower natural gas retail volumes were driven by unfavorable weather in all jurisdictions partly offset by customer growth.
Previous wording
Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $380.3 million for the six months ended June 30, 2024, as compared with $370.3 million for the six months ended June 30, 2023. Primary components of the change include the following (in millions):
Current wording
Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $569.7 million for the nine months ended September 30, 2024, as compared with $546.8 million for the nine months ended September 30, 2023. Primary components of the change include the following (in millions):
Previous wording
Consolidated operating income for the three months ended June 30, 2024 was $61.6 million as compared with $45.6 million in the same period of 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, and electric and natural gas retail volumes. These were offset in part by a less favorable QF liability adjustment in the current year, non-recoverable Montana electric supply costs, depreciation, and operating, administrative and general costs.
Current wording
Consolidated operating income for the nine months ended September 30, 2024 was $231.6 million as compared with $197.3 million in the same period of 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenues, Montana property tax tracker collections, and electric retail volumes. These were offset in part by non-recoverable Montana electric supply costs, a less favorable QF liability adjustment in the current year, natural gas retail volumes, depreciation, operating, and administrative and general costs.
Previous wording
Consolidated interest expense was $62.9 million for the six months ended June 30, 2024 as compared with $56.4 million for the same period of 2023. This increase was due to higher borrowings and interest rates partly offset by lower interest on our revolving credit facilities and higher capitalization of AFUDC.
Current wording
Consolidated interest expense was $96.3 million for the nine months ended September 30, 2024 as compared with $85.1 million for the same period of 2023. This increase was due to higher borrowings and interest rates partly offset by higher capitalization of AFUDC.
Previous wording
Consolidated other income was $10.5 million for the six months ended June 30, 2024 as compared to $8.8 million during the same period of 2023. This increase was primarily due a $2.3 million reversal of a previously expensed Community Renewable Energy Project penalty due to a favorable legal ruling and higher capitalization of AFUDC, partly offset by a $2.5 million non-cash impairment of an alternative energy storage equity investment and an increase in the non-service component of pension expense.
Current wording
Consolidated other income was $19.6 million for the nine months ended September 30, 2024 as compared to $12.9 million during the same period of 2023. This increase was primarily due a $2.3 million reversal of a previously expensed Community Renewable Energy Project penalty due to a favorable legal ruling, higher capitalization of AFUDC, a decrease in the non-service component of pension expense, and an increase in the value of deferred shares held in trust for deferred compensation, partly offset by a $2.5 million non-cash impairment of an alternative energy storage equity investment.
Previous wording
Consolidated income tax expense for the six months ended June 30, 2024 was $14.6 million as compared to $12.4 million in the same period of 2023. Our effective tax rate for the six months ended June 30, 2024 was 13.1% as compared with 13.2% for the same period in 2023. Income tax expense for the six months ended June 30, 2023 includes a one-time $3.2 million charge for the reduction of previously claimed alternative minimum tax credits.
Current wording
Consolidated income tax expense for the nine months ended September 30, 2024 was $11.4 million as compared to $14.1 million in the same period of 2023. Our effective tax rate for the nine months ended September 30, 2024 was 7.4% as compared with 11.3% for the same period in 2023. As further discussed in Note 3 - Income Taxes, during the third quarter of 2024 we filed a tax accounting method change with the IRS consistent with the guidance for natural gas transmission and distribution property. This resulted in an income tax benefit of $7.0 million during the nine months ended September 30, 2024, related to repair costs that were previously capitalized for tax purposes in the 2022 and prior tax years. Income tax expense for the nine months ended September 30, 2023 includes a one-time $3.2 million charge for the reduction of previously claimed alternative minimum tax credits.
Previous wording
Higher retail volumes were driven by favorable weather in Montana impacting residential demand, higher industrial demand, and customer growth in all jurisdictions, partly offset by unfavorable weather in South Dakota impacting residential demand and lower commercial demand.
Current wording
Higher electric retail volumes were driven by favorable weather in Montana impacting residential demand, higher commercial and industrial demand, and customer growth in all jurisdictions, partly offset by unfavorable weather in South Dakota impacting residential demand.
Previous wording
The following summarizes the components of the changes in electric utility margin for the six months ended June 30, 2024 and 2023 (in millions):
Current wording
The following summarizes the components of the changes in electric utility margin for the nine months ended September 30, 2024 and 2023 (in millions):
Previous wording
Retail volume impact was unfavorable as lower residential usage, due to unfavorable weather, and lower commercial demand, was partly offset by higher industrial demand and customer growth.
Current wording
Electric retail volume impact was favorable due to higher residential usage in Montana due to favorable weather, higher industrial volumes, and customer growth, partly offset by lower residential usage in South Dakota due to unfavorable weather, and lower commercial demand.
Previous wording
Under the PCCAM, net supply costs higher or lower than the PCCAM Base (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the six months ended June 30, 2024, we under-collected supply costs of $16.1 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $1.8 million (10 percent of the PCCAM Base cost variance). For the six months ended June 30, 2023, we over-collected supply costs of $23.4 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $2.6 million.
Current wording
Under the PCCAM, net supply costs higher or lower than the PCCAM Base (excluding qualifying facility (QF) costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the nine months ended September 30, 2024, we under-collected supply costs of $10.1 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $1.2 million (10 percent of the PCCAM Base cost variance). For the nine months ended September 30, 2023, we over-collected supply costs of $23.5 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $2.6 million.
Previous wording
The adjustment to our electric QF liability (unrecoverable costs associated with PURPA contracts as part of a 2002 stipulation with the MPSC and other parties) reflects a $0.8 million gain in 2024, as compared with a $5.0 million gain for the same period in 2023, as further explained above in the consolidated results of operations for the three months ended June 30, 2024.
Current wording
The adjustment to our electric QF liability (unrecoverable costs associated with PURPA contracts as part of a 2002 stipulation with the MPSC and other parties) reflects a $0.8 million gain in 2024, as compared with a $5.0 million gain for the same period in 2023, as further explained above in the consolidated results of operations for the nine months ended September 30, 2024.
Previous wording
The following summarizes the components of the changes in natural gas utility margin for the six months ended June 30, 2024 and 2023:
Current wording
The following summarizes the components of the changes in natural gas utility margin for the nine months ended September 30, 2024 and 2023:
Previous wording
As of June 30, 2024, our total net liquidity was approximately $393.4 million, including $6.4 million of cash and $387.0 million of revolving credit facility availability with no letters of credit outstanding.
Current wording
As of September 30, 2024, our total net liquidity was approximately $316.5 million, including $2.5 million of cash and $314.0 million of revolving credit facility availability with no letters of credit outstanding.
Previous wording
As of June 30, 2024, cash, cash equivalents, and restricted cash were $31.0 million as compared with $25.2 million as of December 31, 2023 and $24.0 million as of June 30, 2023. Cash provided by operating activities totaled $223.9 million for the six months ended June 30, 2024 as compared with $294.1 million during the six months ended June 30, 2023. As shown in the table below, this decrease in operating cash flows is primarily due to significant net cash inflows in the prior period from the recovery of previously under-collected energy supply costs, compared to net cash outflows for energy supply costs in the current period, primarily related to a January 2024 cold weather event.
Current wording
As of September 30, 2024, cash, cash equivalents, and restricted cash were $27.9 million as compared with $25.2 million as of December 31, 2023 and $21.7 million as of September 30, 2023. Cash provided by operating activities totaled $343.9 million for the nine months ended September 30, 2024 as compared with $427.0 million during the nine months ended September 30, 2023. As shown in the table below, this decrease in operating cash flows is primarily due to significant net cash inflows in the prior period from the recovery of previously under-collected energy supply costs, compared to minimal net cash inflows for energy supply costs in the current period due to the timely recovery of energy supply costs.
Previous wording
Cash used in investing activities totaled $248.3 million during the six months ended June 30, 2024, as compared with $265.8 million during the six months ended June 30, 2023. Plant additions during the first six months of 2024 include maintenance additions of approximately $130.5 million and capacity related capital expenditures of $116.9 million. Plant additions during the first six months of 2023 included maintenance additions of approximately $142.2 million and capacity related capital expenditures of approximately $121.2 million.
Current wording
Cash used in investing activities totaled $405.1 million during the nine months ended September 30, 2024, as compared with $411.0 million during the nine months ended September 30, 2023. Plant additions during the first nine months of 2024 include maintenance additions of approximately $216.5 million and capacity related capital expenditures of $184.0 million. Plant additions during the first nine months of 2023 included maintenance additions of approximately $235.0 million and capacity related capital expenditures of approximately $172.2 million.
Previous wording
Cash provided by financing activities totaled $30.2 million during the six months ended June 30, 2024, as compared with cash used in financing activities of $26.8 million during the six months ended June 30, 2023. During the six months ended June 30, 2024, cash provided by financing activities reflects proceeds from the issuance of debt of $215.0 million and short-term borrowings of $100.0 million, partly offset by net repayments under our revolving lines of credit of $105.0 million, repayment of 1.00 percent, $100.0 million of Montana First Mortgage Bonds, and payment of dividends of $79.3 million. During the six months ended June 30, 2023, cash used in financing activities reflects net repayments under our revolving lines of credit of $259.0 million and payment of dividends of $76.1 million, partly offset by proceeds from the issuance of debt of $300.0 million and proceeds received from the issuance of common stock of $10.8 million.
Current wording
Cash provided by financing activities totaled $63.9 million during the nine months ended September 30, 2024, as compared with cash used in financing activities of $16.8 million during the nine months ended September 30, 2023. During the nine months ended September 30, 2024, cash provided by financing activities reflects proceeds from the issuance of debt of $215.0 million and short-term borrowings of $100.0 million, partly offset by payment of dividends of $118.9 million, repayment of 1.00 percent, $100.0 million of Montana First Mortgage Bonds, and net repayments under our revolving lines of credit of $32.0 million. During the nine months ended September 30, 2023, cash used in financing activities reflects net repayments under our revolving lines of credit of $273.0 million and payment of dividends of $115.0 million, partly offset by proceeds from the issuance of debt of $300.0 million and proceeds received from the issuance of common stock of $73.6 million.
Previous wording
As of June 30, 2024 and 2023 the outstanding balances of our credit facilities were $213.0 million and $191.0 million, respectively. As of July 26, 2024, the availability under our credit facilities was approximately $371.0 million, and there were no letters of credit outstanding.
Current wording
As of September 30, 2024 and 2023 the outstanding balances of our credit facilities were $286.0 million and $177.0 million, respectively. As of October 25, 2024, the availability under our credit facilities was approximately $335.0 million, and there were no letters of credit outstanding.
Previous wording
(1)Represents cash payments for long-term debt and excludes $13.2 million of debt discounts and debt issuance costs, net.
Current wording
(1)Represents cash payments for long-term debt and excludes $12.8 million of debt discounts and debt issuance costs, net.
Previous wording
(2)We estimate cash obligations related to our pension and other postretirement benefit programs for five years, as it is not practicable to estimate thereafter. Pension and postretirement benefit estimates reflect our expected cash contributions, which may be in excess of minimum funding requirements.
Current wording
(2)We estimate cash obligations related to our pension and other postretirement benefit programs for five years, as it is not practicable to estimate thereafter. Pension and postretirement benefit estimates reflect our expected cash contribut ions, which may be in excess of minimum funding requirements.
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Previous report — wording carried elsewhere
Higher retail volumes were driven by favorable weather in Montana and customer growth, partly offset by unfavorable weather in South Dakota and Nebraska.