NorthWestern Energy Group Inc

Previous wording

NorthWestern Energy Group, doing business as NorthWestern Energy, provides electricity and/or natural gas to approximately 775,300 customers in Montana, South Dakota, Nebraska, and Yellowstone National Park. Our operations in Montana and Yellowstone National Park are conducted through our subsidiary, NW Corp, and our operations in South Dakota and Nebraska are conducted through our subsidiary, NWE Public Service. As you read this discussion and analysis, refer to our Consolidated Statements of Income, which present the results of our operations for 2023, 2022 and 2021. Following is a discussion of our strategy and significant trends.

Current wording

NorthWestern Energy Group, doing business as NorthWestern Energy, provides electricity and/or natural gas to approximately 787,000 customers in Montana, South Dakota, Nebraska, and Yellowstone National Park. Our operations in Montana and Yellowstone National Park are conducted through our subsidiary, NW Corp, and our operations in South Dakota and Nebraska are conducted through our subsidiary, NWE Public Service. As you read this discussion and analysis, refer to our Consolidated Statements of Income, which present the results of our operations for 2024, 2023 and 2022. Following is a discussion of our strategy and significant trends.

Previous wording

In 2023, approximately 55 percent of our retail needs from our owned and long-term contracted resources originated from carbon-free resources, compared to approximately 40 percent for the total U.S. electric power industry. We are committed to providing customers with reliable and affordable electric and natural gas services while also being good stewards of the environment. Towards this end, our efforts towards a carbon-free future are outlined through our goal to achieve net zero carbon emissions by 2050. Our vision for the future builds on the progress we have made, including our hydroelectric system in Montana, which is 100 percent carbon free and is readily available capacity. For us, wind generation is a close second and continues to grow. While utility-scale solar energy has not been a significant portion of our energy mix to date, we recently entered into power purchase agreements with two solar projects totaling 160-megawatts that began delivering energy to our Montana customers in 2023. We expect solar to further evolve along with advances in energy storage. We are committed to working with our customers and communities to help them achieve their sustainability goals and add new technology on our system.

Current wording

In 2024, approximately 58 percent of our owned and long-term contracted resources originated from carbon-free resources, compared to approximately 41 percent for the total U.S. electric power industry. We are committed to providing customers with reliable and affordable electric and natural gas services while also being good stewards of the environment. Towards this end, our efforts towards a carbon-free future are outlined through our goal to achieve net zero carbon emissions by 2050. Our vision for the future builds on the progress we have made, including our hydroelectric system in Montana, which is 100 percent carbon free and is readily available capacity. For us, wind generation is a close second and continues to grow. While utility-scale solar energy has not been a significant portion of our energy mix to date, we recently entered into power purchase agreements with two solar projects totaling 160-megawatts that began delivering energy to our Montana customers in 2023. We expect solar to further evolve along with advances in energy storage. We are committed to working with our customers and communities to help them achieve their sustainability goals and add new technology on our system.

Previous wording

Rate reviews are necessary to recover the cost of providing safe, reliable service, while contributing to earnings growth and achieving our financial objectives. We regularly review the need for electric and natural gas rate relief in each state in which we provide service.

Current wording

Rate reviews are necessary to recover the cost of providing safe, reliable service, while contributing to earnings growth and achieving our financial objectives. We regularly review the need for electric and natural gas rate relief in each state in which we provide service. Our ongoing rate review activity includes the following:

Previous wording

South Dakota Electric Rate Review Filing – In June 2023, we filed a South Dakota electric rate review filing (2022 test year) for an annual increase to electric rates totaling approximately $30.9 million. Our request was based on a rate of return of 7.54 percent, a capital structure including 50.5 percent equity, and rate base of $787.3 million. In January 2024, the SDPUC issued a final order approving the settlement agreement between NorthWestern and SDPUC Staff for an annual increase in base rates of approximately $21.5 million and an authorized rate of return of 6.81 percent. The approved settlement is based on a capital structure of 50.5 percent equity and a rate base of $791.8 million. Final rates were effective January 10, 2024. In addition, the SDPUC approved a phase in rate plan rider that allows for the recovery of capital investments not yet included in base rates.

Current wording

South Dakota Natural Gas Rate Review -In June 2024, we filed a natural gas rate review (2023 test year) with the SDPUC for an annual increase to natural gas rates totaling approximately $6.0 million. Our request was based on a rate of return of 7.75 percent and rate base of $95.6 million. In December 2024, the SDPUC issued a final order approving the settlement agreement between NorthWestern and SDPUC Staff for an annual increase in base rates of approximately $4.6 million and an authorized rate of return of 6.91 percent. The approved settlement is based on a rate base of $96.2 million. Final rates were effective December 19, 2024.

Previous wording

Yellowstone County 175 MW plant - Construction of the new generation facility continues to progress and we expect the plant to be operational no later than the end of the third quarter 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 December 31, 2023, total costs of approximately $240.0 million have been incurred, with expected total costs of approximately $310.0 million to $320.0 million. See Note 18 -Commitments and Contingencies to the Consolidated Financial Statements included herein for additional information regarding legal challenges impacting YCGS.

Current wording

Yellowstone County 175 MW plant - Construction of the generation facility was substantially completed and the plant placed in service in October 2024. As of December 31, 2024, we have incurred $305.5 million of generation plant costs and $12.1 million of non-generation plant costs related to YCGS. 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 increased costs. On January 3, 2025, the Montana Supreme Court ordered that the YCGS air quality permit be reinstated. See Note 18 - Commitments and Contingencies to the Consolidated Financial Statements included herein for additional information regarding legal challenges impacting YCGS.

Previous wording

Acquisition of Colstrip Interest - On January 16, 2023, we entered into a definitive agreement (the Avista Agreement) with Avista Corporation (Avista) to acquire Avista's 15 percent interest in each of Units 3 and 4 at the Colstrip Generating Station, a coal-fired, base-load electric generation facility located in Colstrip, Montana. The Avista Agreement provides that the purchase price will be $0 and that we will acquire Avista's interest effective December 31, 2025, subject to the satisfaction of the closing conditions contained within the Avista Agreement. Under the terms of this Avista Agreement, we will be responsible for operating costs starting on January 1, 2026; while Avista 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 Avista's interest.

Current wording

Acquisition of Colstrip Interests - As previously disclosed, in January 2023 and in July 2024, we entered into definitive agreements, the first with Avista Corporation (Avista) and the second with Puget Sound Energy (Puget), to acquire their respective interests in Colstrip Units 3 & 4 for $0. In particular, we agreed to acquire a 15% (222 megawatts) interest from Avista and a 25% (370 megawatts) interest from Puget. These agreements are substantially similar and are both scheduled to close December 31, 2025, subject to the satisfaction of customary closing conditions and approvals contained within the agreements. Under the terms of the agreements, we will be responsible for operating costs starting on January 1, 2026; while Puget and Avista will remain responsible for their respective 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 their interests.

Previous wording

The acquisition of an additional interest under this Avista Agreement in 2026 will provide 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 technologies to provide reliable, affordable and carbon free power through our IRP process.

Current wording

Acquisition of Avista and Puget's interests would result in our ownership of 55 percent of the facility with the ability to guide operating and maintenance investments. This would provide 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

Distribution and Transmission Modernization and Maintenance -The primary goals of our infrastructure investments are to reverse the trend in aging infrastructure, maintain reliability, proactively manage safety, build capacity into the system, and prepare our network for the adoption of new technologies. We are taking a proactive and pragmatic approach to replacing these assets while also evaluating the implementation of additional technologies to prepare the overall system for smart grid applications. Over $1.8 billion or 75 percent of our capital forecast above is projected to be spent on our distribution and transmission system. Beginning in 2021, and continuing through 2025, we expect to install automated metering infrastructure in Montana at a total cost of approximately $134.0 million, of which $41.7 million remains and is reflected in the five year capital forecast above.

Current wording

Distribution and Transmission Modernization and Maintenance -The primary goals of our infrastructure investments are to reverse the trend in aging infrastructure, maintain reliability, proactively manage safety, build capacity into the system, and prepare our network for the adoption of new technologies. We are taking a proactive and pragmatic approach to replacing these assets while also evaluating the implementation of additional technologies to prepare the overall system for smart grid applications. Over $2.2 billion or 82 percent of our capital forecast above is projected to be spent on our distribution and transmission system. Beginning in 2021, we began installing automated metering infrastructure in Montana. We expect this project to be substantially complete in 2025, with a total cost of approximately $105.0 million, of which approximately $10.0 million remains and is reflected in the five year capital forecast above.

Previous wording

Revenues are also impacted by customer growth and usage, the latter of which is primarily affected by weather and the impact of energy efficiency initiatives and investment. Very cold winters increase demand for natural gas and to a lesser extent, electricity, while warmer than normal summers increase demand for electricity, especially among our residential and commercial customers. We measure this effect using degree-days, which is the difference between the average daily actual temperature and a baseline temperature of 65 degrees. Heating degree-days result when the average daily temperature is less than the baseline. Cooling degree-days result when the average daily temperature is greater than the baseline. The statistical weather information in our regulated segments represents a comparison of this data.

Current wording

Revenues are also impacted by customer growth and usage, the latter of which is primarily affected by weather and the impact of energy efficiency initiatives and investment. Very cold winters increase demand for natural gas and to a lesser extent, electricity, while warmer than normal summers increase demand for electricity, especially among our residential customers. We measure this effect using degree-days, which is the difference between the average daily actual temperature and a baseline temperature of 65 degrees. Heating degree-days result when the average daily temperature is less than the baseline. Cooling degree-days result when the average daily temperature is greater than the baseline. The statistical weather information in our regulated segments represents a comparison of this data.

Previous wording

Consolidated gross margin in 2023 was $416.3 million as compared with $376.9 million in 2022, an increase of $39.4 million or 10.5 percent. This increase was primarily due to new base rates resulting from the Montana rate review, lower non-recoverable Montana electric supply costs, higher Montana property tax tracker collections, and lower property and other taxes not recoverable within trackers, partly offset by lower electric and natural gas retail volumes, higher depreciation and depletion expense, and higher operating and maintenance expense.

Current wording

Consolidated gross margin in 2024 was $460.8 million as compared with $416.3 million in 2023, an increase of $44.5 million or 10.7 percent. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenue, Montana interim rates, subject to refund, and Montana property tax tracker collections. These were offset in party by non-recoverable Montana electric supply costs, a less favorable QF liability adjustment, electric and natural gas retail volumes, and depreciation.

Previous wording

Consolidated utility margin in 2023 was $1,001.9 million as compared with $985.8 million in 2022, an increase of $16.1 million, or 1.6 percent.

Current wording

Consolidated utility margin in 2024 was $1,080.1 million as compared with $1,001.9 million in 2023, an increase of $78.2 million, or 7.8 percent.

Previous wording

Lower electric retail volumes were driven by unfavorable weather in Montana impacting residential demand and lower commercial demand as compared to the prior year, partly offset by customer growth. Lower natural gas retail volumes were driven by unfavorable weather in Montana, partly offset by favorable weather in Nebraska and customer growth.

Current wording

Lower electric residential and commercial retail volumes were driven by unfavorable weather in South Dakota impacting residential demand and lower commercial demand in all jurisdictions as compared to the prior year, 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.

Previous wording

Under the PCCAM, net costs higher or lower than the PCCAM Base (excluding QF costs) are allocated 90 percent to Montana customers and 10 percent to shareholders. For the twelve months ended December 31, 2023, we over collected supply costs of $32.9 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $7.0 million (10 percent of the PCCAM Base cost variance), which is inclusive of a $3.2 million increase in pre-tax earnings related to the retroactive application of higher PCCAM Base rates to July 1, 2022. For the twelve months ended December 31, 2022, we under collected costs of $64.8 million resulting in an increase to the under collection of costs, and recorded a reduction in pre-tax earnings of $7.2 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 twelve months ended December 31, 2024, we under-collected supply costs of $8.0 million resulting in an increase to our under collection of costs, and recorded a decrease in pre-tax earnings of $0.9 million (10 percent of the PCCAM Base cost variance). For the twelve months ended December 31, 2023, we over collected supply costs of $32.9 million resulting in a reduction to our under collection of costs, and recorded an increase in pre-tax earnings of $7.0 million, which was inclusive of a $3.2 million increase in pre-tax earnings related to the retroactive application of higher PCCAM Base rates to July 1, 2022.

Previous wording

•A favorable adjustment, 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 is the last year of the contract that contains variable pricing terms. This is compared to a favorable adjustment of $3.3 million in the prior year due to less than previously estimated actual price escalation.

Current wording

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 wording

Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $701.4 million in 2023, as compared with $722.7 million in 2022. Primary components of the change include the following (in millions):

Current wording

Consolidated operating expenses, excluding fuel, purchased supply and direct transmission expense, were $756.7 million in 2024, as compared with $701.4 million in 2023. Primary components of the change include the following (in millions):

Previous wording

Consolidated operating income in 2023 was $300.5 million as compared with $263.1 million in 2022. This increase was primarily due to new base rates resulting from the Montana rate review, lower non-recoverable Montana electric supply costs, higher Montana property tax tracker collections, and lower property and other taxes not recoverable within trackers, partly offset by lower electric and natural gas retail volumes, higher depreciation and depletion expense, and higher operating, maintenance, and administrative expense.

Current wording

Consolidated operating income in 2024 was $323.3 million as compared with $300.5 million in 2023. This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenue, Montana interim rates, subject to refund, and Montana property tax tracker collections. These were offset in part by non-recoverable Montana electric supply costs, a less favorable QF liability adjustment, electric and natural gas retail volumes, depreciation, operating, and administrative and general costs.

Previous wording

Consol idated interest expense in 2023 was $114.6 million, as compared with $100.1 million in 2022. This increase was due to higher borrowings and interest rates, partly offset by higher capitalization of AFUDC.

Current wording

Consol idated interest expense in 2024 was $131.7 million, as compared with $114.6 million in 2023. This increase was due to higher borrowings and interest rates, partly offset by higher capitalization of AFUDC.

Previous wording

Consolidated other income in 2023 was $15.8 million, as compared with $19.4 million in 2022. This decrease was primarily due to an increase in the non-service cost component of pension expense, partly offset by the prior year CREP penalty and higher capitalization of AFUDC.

Current wording

Consolidated other income in 2024 was $23.0 million, as compared with $15.8 million in 2023. This increase was primarily due to 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 cost component of pension expense, and an increase in the value of deferred shares held in trust for deferred compensation, offset in part by a $2.5 million non-cash impairment of an alternative energy storage equity investment.

Previous wording

Consolidated income tax expense in 2023 was $7.5 million, as compared to an income tax benefit of $0.6 million in 2022. Our effective tax rate for the twelve months ended December 31, 2023 was 3.7 percent as compared with (0.3) percent for the same period of 2022. Income tax expense for the twelve months ended December 31, 2023, includes a one-time $3.2 million expense for the reduction of previously claimed alternative minimum tax credits as well as a $3.2 million benefit related to a reduction in our unrecognized tax benefits. We currently estimate our effective tax rate will range between 12.0 percent to 14.0 percent in 2024. Based on the significant NOL we generated during the year ended December 31, 2023, we anticipate paying minimal cash for income taxes into 2028.

Current wording

Consolidated income tax benefit in 2024 was $9.4 million, as compared to an income tax expense of $7.5 million in 2023. Our effective tax rate for the twelve months ended December 31, 2024 was (4.4) percent as compared with 3.7 percent for the same period of 2023. As further discussed in Note 12 - Income Taxes, income tax benefit for the twelve months ended December 31, 2024, includes a $21.0 million benefit related to a reduction in our unrecognized tax benefits, inclusive of $4.1 million of previously accrued interest ($16.9 million net of interest). Additionally, during the twelve months ended December 31, 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 2024, related to repair costs that were previously capitalized for tax purposes in the 2022 and prior tax years. Income tax expense for the twelve months ended December 31, 2023, includes a one-time $3.2 million expense for the reduction of previously claimed alternative minimum tax credits as well as a $3.2 million benefit related to a reduction in our unrecognized tax benefits.

Previous wording

Lower retail volumes were driven by unfavorable weather in Montana impacting residential demand and lower commercial demand as compared to the prior year, partly offset by customer growth.

Current wording

Lower electric residential and commercial retail volumes were driven by unfavorable weather in South Dakota impacting residential demand and lower commercial demand in all jurisdictions as compared to the prior year, partly offset by higher industrial demand and customer growth.

Previous wording

The 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 $5.0 million gain in 2023, as compared with a $5.1 million gain for the same period in 2022, due to the combination of:

Current wording

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, as further explained above in the consolidated results of operations for the twelve months ended December 31, 2024.

Previous wording

As of December 31, 2023, our total consolidated net liquidity was approximately $241.2 million, including $9.2 million of cash and $232.0 million of revolving credit facility availability with no letters of credit outstanding.

Current wording

As of December 31, 2024, our total consolidated net liquidity was approximately $191.3 million, including $4.3 million of cash and $187.0 million of revolving credit facility availability with no letters of credit outstanding.

Previous wording

As of December 31, 2023, cash, cash equivalents, and restricted cash were $25.2 million as compared with $22.5 million as of December 31, 2022. Cash provided by operating activities totaled $489.2 million for the year ended December 31, 2023 as compared with $307.2 million for the year ended December 31, 2022. As shown in the table below, this increase in operating cash flows is primarily due to a $123.9 million improvement in net cash inflows for previously uncollected energy supply costs and interim and final rates from our Montana rate review.

Current wording

As of December 31, 2024, cash, cash equivalents, and restricted cash were $29.0 million as compared with $25.2 million as of December 31, 2023. Cash provided by operating activities totaled $406.8 million for the year ended December 31, 2024 as compared with $489.2 million for the year ended December 31, 2023. As shown in the table below, this decrease in operating cash flows is primarily due to minimal net cash inflows for energy supply costs in the current period due to the timely recovery of energy supply costs compared to significant net cash inflows in 2023 from the recovery of previously under-collected energy supply costs.

Previous wording

Cash used in investing activities totaled $570.8 million during the year ended December 31, 2023, as compared with $516.8 million during 2022. Plant additions during 2023 include capital maintenance additions of approximately $321.9 million and capacity related capital expenditures of approximately $245.0 million. Plant additions during 2022 included capital maintenance additions of approximately $295.4 million and capacity related capital expenditures of approximately $219.7 million. As discussed above in the “Significant Infrastructure Investments and Initiatives” section, our capital expenditures are forecasted to be $500 million in 2024.

Current wording

Cash used in investing activities totaled $554.5 million during the year ended December 31, 2024, as compared with $570.8 million during 2023. Plant additions during 2024 include capital maintenance additions of approximately $324.0 million and capacity related capital expenditures of approximately $225.3 million. Plant additions during 2023 included capital maintenance additions of approximately $321.9 million and capacity related capital expenditures of approximately $245.0 million. As discussed above in the “Significant Infrastructure Investments and Initiatives” section, our capital expenditures are forecasted to be $531.0 million in 2024. Additionally, as discussed above in the "Significant Trends and Regulation" section, we anticipate investing $39.0 million for the acquisition of the Energy West Montana Assets in 2025.

Previous wording

Cash provided by financing activities totaled $84.3 million during the year ended December 31, 2023 as compared with $213.3 million during the year ended December 31, 2022. During the year ended December 31, 2023, cash provided by financing activities reflects net proceeds from the issuance of debt of $300.0 million and proceeds received from the issuance of common stock of $73.6 million, partly offset by payment of dividends of $154.1 million and net repayments under our revolving lines of credit of $132.0 million. During the year ended December 31, 2022, cash provided by financing activities reflects proceeds received from the issuance of common stock of $277.0 million and net issuances under our revolving lines of credit of $77.0 million, partly offset by payment of dividends of $140.1 million.

Current wording

Cash provided by financing activities totaled $151.5 million during the year ended December 31, 2024 as compared with $84.3 million during the year ended December 31, 2023. During the year ended December 31, 2024, cash provided by financing activities reflects proceeds from the issuance of long-term debt of $215.0 million, short-term borrowings of $100.0 million, and net issuances under our revolving lines of credit of $95.0 million, partly offset by payment of dividends of $158.6 million and repayment of 1.00 percent, $100.0 million of Montana First Mortgage Bonds. During the year ended December 31, 2023, cash provided by financing activities reflects net proceeds from the issuance of long-term debt of $300.0 million and proceeds received from the issuance of common stock of $73.6 million, partly offset by payment of dividends of $154.1 million and net repayments under our revolving lines of credit of $132.0 million.

Previous wording

Our material cash requirements are also related to investment in our business through our capital expenditure program, which is discussed above in the “Significant Infrastructure Investments and Initiatives” section. Our capital expenditures are forecasted to be $500 million in 2024, $506 million in 2025, and $463 million in 2026. We anticipate funding capital expenditures through cash flows from operations, available credit sources, debt issuances and future rate increases. The actual amount of capital expenditures is subject to certain factors including the impact that a material change in operations, available financing, supply chain issues, or inflation could impact our current liquidity and ability to fund capital resource requirements. Events such as these could cause us to defer a portion of our planned capital expenditures, as necessary. To fund our strategic growth opportunities, we evaluate the additional capital need in balance with debt capacity and equity issuances that would be intended to allow us to maintain investment grade ratings.

Current wording

Our material cash requirements are also related to investment in our business through our capital expenditure program, which is discussed above in the “Significant Infrastructure Investments and Initiatives” section. Our capital expenditures are forecasted to be $531 million in 2025, $549 million in 2026, and $557 million in 2027. We anticipate funding capital expenditures through cash flows from operations, available credit sources, debt issuances and future rate increases. The actual amount of capital expenditures is subject to certain factors including the impact that a material change in operations, available financing, supply chain issues, or inflation could impact our current liquidity and ability to fund capital resource requirements. Events such as these could cause us to defer a portion of our planned capital expenditures, as necessary. To fund our strategic growth opportunities, we evaluate the additional capital need in balance with debt capacity and equity issuances that would be intended to allow us to maintain investment grade ratings.

Previous wording

For further information on our credit facilities, see Note 10 - Unsecured Credit Facilities to the Consolidated Financial Statements included herein.

Current wording

For further information on our credit facilities, see Note 10 - Short-Term Borrowings and Credit Arrangements to the Consolidated Financial Statements included herein.

Previous wording

As of February 9, 2024, availability under our revolving credit facilities was approximately $325.0 million, and there were no letters of credit outstanding.

Current wording

As of February 7, 2025, availability under our revolving credit facilities was approximately $233.0 million, and there were no letters of credit outstanding.

Previous wording

We generally issue long-term debt to refinance other long-term debt maturities and borrowings under our revolving credit facilities, as well as to fund long-term capital investments and strategic opportunities. We have $100 million of debt maturing in 2024, which we intend to refinance.

Current wording

We generally issue long-term debt to refinance other long-term debt maturities and borrowings under our revolving credit facilities, as well as to fund long-term capital investments and strategic opportunities. We have $300.0 million of long-term debt maturing in 2025, which we intend to refinance.

Previous wording

(1) Represents cash payments for long-term debt and excludes $13.1 million of debt discounts and debt issuance costs, net.

Current wording

(1) Represents cash payments for long-term debt and excludes $12.4 million of debt discounts and debt issuance costs, net.

Previous wording

(3) Certain QFs require us to purchase minimum amounts of energy at prices ranging from $67 to $136 per MWH through 2029. Our estimated gross contractual obligation related to these QFs is approximately $303.1 million. A portion of the costs incurred to purchase this energy is recoverable through rates authorized by the MPSC, totaling approximately $266.5 million.

Current wording

(3) Certain QFs require us to purchase minimum amounts of energy at prices ranging from $118 to $130 per MWH through 2029. Our estimated gross contractual obligation related to these QFs is approximately $229.0 million. A portion of the costs incurred to purchase this energy is recoverable through rates authorized by the MPSC, totaling approximately $205.8 million.

Previous wording

(5) Contractual interest payments include our revolving credit facilities, which have a variable interest rate. We have assumed an average interest rate of 6.71 percent on the outstanding balance through maturity of the credit facilities.

Current wording

(5) Contractual interest payments include our revolving credit facilities, which have a variable interest rate. We have assumed an average interest rate of 5.71 percent on the outstanding balance through maturity of the credit facilities.

Previous wording

(7) The table above excludes potential tax payments related to uncertain tax positions as they are not practicable to estimate. Additionally, the table above excludes reserves for environmental remediation (See Note 18 - Commitments and Contingencies) and AROs (see Note 6 - Asset Retirement Obligations) as the amount and timing of cash payments may be uncertain.

Current wording

(7) The table above excludes potential tax payments related to unrecognized tax benefits as they are not practicable to estimate. Additionally, the table above excludes reserves for environmental remediation (See Note 18 - Commitments and Contingencies) and AROs (see Note 6 - Asset Retirement Obligations) as the amount and timing of cash payments may be uncertain.

Previous wording

Other Obligations -As a co-owner of Colstrip, we provided surety bonds of approximately $15.7 million and $17.3 million as of December 31, 2023 and 2022, respectively, to ensure the operation and maintenance of remedial and closure actions are carried out related to the Administrative Order on Consent Regarding Impacts Related to Wastewater Facilities Comprising the Closed-Loop System at Colstrip Steam Electric Stations, Colstrip Montana (the AOC) as required by the MDEQ. As costs are incurred under the AOC, the surety bonds will be reduced.

Current wording

Other Obligations -As a co-owner of Colstrip, we provided surety bonds of approximately $15.8 million and $15.7 million as of December 31, 2024 and 2023, respectively, to ensure the operation and maintenance of remedial and closure actions are carried out related to the Administrative Order on Consent Regarding Impacts Related to Wastewater Facilities Comprising the Closed-Loop System at Colstrip Steam Electric Stations, Colstrip Montana (the AOC) as required by the MDEQ. As costs are incurred under the AOC, the surety bonds will be reduced.

Previous wording

We set the discount rate using a yield curve analysis, which projects benefit cash flows into the future and then discounts those cash flows to the measurement date using a yield curve. This is done by constructing a hypothetical bond portfolio whose cash flow from coupons and maturities matches the year-by-year projected benefit cash flow from our plans. Based on this analysis as of December 31, 2023, our discount rate on both the NorthWestern Corporation pension plan and NorthWestern Energy pension plan is 4.95-5.00 percent.

Current wording

We set the discount rate using a yield curve analysis, which projects benefit cash flows into the future and then discounts those cash flows to the measurement date using a yield curve. This is done by constructing a hypothetical bond portfolio whose cash flow from coupons and maturities matches the year-by-year projected benefit cash flow from our plans. Based on this analysis as of December 31, 2024, our discount rate for both NorthWestern Energy SD/NE Pension Plan and NorthWestern Energy MT Pension Plan is 5.50 percent and 5.60 percent, respectively.

Previous wording

In determining the expected long-term rate of return on plan assets, we review historical returns, the future expectations for returns for each asset class weighted by the target asset allocation of the pension and postretirement portfolios, and long-term inflation assumptions. Our expected long-term rate of return on assets assumptions are 5.15% percent and 6.65% percent on the NorthWestern Corporation and NorthWestern Energy pension plan, respectively, for 2024.

Current wording

In determining the expected long-term rate of return on plan assets, we review historical returns, the future expectations for returns for each asset class weighted by the target asset allocation of the pension and postretirement portfolios, and long-term inflation assumptions. Our expected long-term rate of return on assets assumptions are 4.58% percent and 6.17% percent on the NorthWestern Energy SD/NE Pension Plan and NorthWestern Energy MT Pension Plan, respectively, for 2025.

Previous wording

The interpretation of tax laws involves uncertainty. Ultimate resolution of income tax matters may result in favorable or unfavorable impacts to net income and cash flows and adjustments to tax-related assets and liabilities could be material. The uncertainty and judgment involved in the determination and filing of income taxes is accounted for by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the Consolidated Financial Statements. We recognize tax positions that meet the more-likely-than-not threshold as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. We have unrecognized tax benefits of approximately $28.1 million as of December 31, 2023. The resolution of tax matters in a particular future period could have a material impact on our provision for income taxes, results of operations and our cash flows. See Note 12 - Income Taxes to the Consolidated Financial Statements for further discussion.

Current wording

The interpretation of tax laws involves uncertainty. Ultimate resolution of income tax matters may result in favorable or unfavorable impacts to net income and cash flows and adjustments to tax-related assets and liabilities could be material. The uncertainty and judgment involved in the determination and filing of income taxes is accounted for by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the Consolidated Financial Statements. We recognize tax positions that meet the more-likely-than-not threshold as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. We have unrecognized tax benefits of approximately $9.6 million as of December 31, 2024. The resolution of tax matters in a particular future period could have a material impact on our provision for income taxes, results of operations and our cash flows. See Note 12 - Income Taxes to the Consolidated Financial Statements for further discussion.