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What changed in NorthWestern Energy Group, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NorthWestern Energy Group, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+169 added−178 removedSource: 10-K (2025-02-13) vs 10-K (2024-02-15)

Top changes in NorthWestern Energy Group, Inc.'s 2024 10-K

169 paragraphs added · 178 removed · 119 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

62 edited+18 added−14 removed43 unchanged
Biggest changeThe following table summarizes the differences between our effective tax rate and the federal statutory rate (in millions): 50 Year Ended December 31, 2023 2022 Income Before Income Taxes $ 201.6 $ 182.4 Income tax calculated at federal statutory rate 42.4 21.0 % 38.3 21.0 % Permanent or flow through adjustments: State income taxes, net of federal provisions 0.6 0.3 0.6 0.3 Flow-through repairs deductions (25.9) (12.9) (22.7) (12.4) Production tax credits (10.3) (5.1) (13.2) (7.2) Unregulated Tax Cuts and Jobs Act excess deferred income taxes (3.4) (1.7) — — Release of unrecognized tax benefits (3.2) (1.6) — — Amortization of excess deferred income taxes (2.2) (1.1) (1.7) (0.9) Plant and depreciation of flow through items 6.6 3.3 (0.2) (0.1) Reduction to previously claimed alternative minimum tax credit 3.2 1.6 — — Prior year permanent return to accrual adjustments 0.0 0.0 (1.4) (0.8) Other, net (0.3) (0.1) (0.3) (0.2) (34.9) (17.3) (38.9) (21.3) Income Tax Expense (Benefit) $ 7.5 3.7 % $ (0.6) (0.3) % Our effective tax rate typically differs from the federal statutory tax rate primarily due to the regulatory impact of flowing through federal and state tax benefits of repairs deductions, state tax benefit of accelerated tax depreciation deductions (including bonus depreciation when applicable) and production tax credits. 51 ELECTRIC OPERATIONS We have various classifications of electric revenues, defined as follows: • Retail: Sales of electricity to residential, commercial and industrial customers, and the impact of regulatory mechanisms. • Regulatory amortization: Primarily represents timing differences for electric supply costs and property taxes between when we incur these costs and when we recover these costs in rates from our customers, which is also reflected in fuel, purchased supply and direct transmission expense and therefore has minimal impact on utility margin.
Biggest changeThe following table summarizes the differences between our effective tax rate and the federal statutory rate (in millions): Year Ended December 31, 2024 2023 Income Before Income Taxes $ 214.7 $ 201.6 Income tax calculated at federal statutory rate 45.1 21.0 % 42.4 21.0 % Permanent or flow through adjustments: State income taxes, net of federal provisions 0.4 0.2 0.6 0.3 Flow-through repairs deductions (23.1) (10.8) (25.9) (12.9) Release of unrecognized tax benefits (2024 is inclusive of $4.1 million of related interest previously accrued) (21.0) (9.8) (3.2) (1.6) Production tax credits (11.1) (5.2) (10.3) (5.1) Gas repairs safe harbor method change (7.0) (3.3) — — Amortization of excess deferred income taxes (2.9) (1.4) (2.2) (1.1) Prior year permanent return to accrual adjustments (0.4) (0.2) — — Plant and depreciation of flow through items 9.4 4.4 6.6 3.3 Unregulated Tax Cuts and Jobs Act excess deferred income taxes — — (3.4) (1.7) Reduction to previously claimed alternative minimum tax credit — — 3.2 1.6 Other, net 1.2 0.7 (0.3) (0.1) (54.5) (25.4) (34.9) (17.3) Income Tax (Benefit) Expense $ (9.4) (4.4) % $ 7.5 3.7 % Our effective tax rate typically differs from the federal statutory tax rate primarily due to the regulatory impact of flowing through federal and state tax benefits of repairs deductions, state tax benefit of accelerated tax depreciation deductions (including bonus depreciation when applicable) and production tax credits. 50 ELECTRIC OPERATIONS We have various classifications of electric revenues, defined as follows: • Retail: Sales of electricity to residential, commercial and industrial customers, and the impact of regulatory mechanisms. • Regulatory amortization: Primarily represents timing differences for electric supply costs and property taxes between when we incur these costs and when we recover these costs in rates from our customers, which is also reflected in fuel, purchased supply and direct transmission expense and therefore has minimal impact on utility margin.
(2) Non-GAAP financial measure. See “Non-GAAP Financial Measure” above. Also see "Overall Consolidated Results" above for reconciliation of gross margin to utility margin.
(2) Non-GAAP financial measure. See “Non-GAAP Financial Measure” above. Also see "Overall Consolidated Results" above for reconciliation of gross margin to utility margin.
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.
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.
Our wholesale and other revenues are largely utility margin neutral as they are offset by changes in fuel, purchased supply and direct transmission expenses. 53 NATURAL GAS OPERATIONS We have various classifications of natural gas revenues, defined as follows: • Retail: Sales of natural gas to residential, commercial and industrial customers, and the impact of regulatory mechanisms. • Regulatory amortization: Primarily represents timing differences for natural gas supply costs and property taxes between when we incur these costs and when we recover these costs in rates from our customers, which is also reflected in fuel, purchased supply and direct transmission expenses and therefore has minimal impact on utility margin.
Our wholesale and other revenues are largely utility margin neutral as they are offset by changes in fuel, purchased supply and direct transmission expenses. 52 NATURAL GAS OPERATIONS We have various classifications of natural gas revenues, defined as follows: • Retail: Sales of natural gas to residential, commercial and industrial customers, and the impact of regulatory mechanisms. • Regulatory amortization: Primarily represents timing differences for natural gas supply costs and property taxes between when we incur these costs and when we recover these costs in rates from our customers, which is also reflected in fuel, purchased supply and direct transmission expenses and therefore has minimal impact on utility margin.
Our wholesale and other revenues are largely utility margin neutral as they are offset by changes in fuel, purchased supply and direct transmission expenses. 55 LIQUIDITY AND CAPITAL RESOURCES Liquidity We require liquidity to support and grow our business, and use our liquidity for working capital needs, capital expenditures, investments in or acquisitions of assets, and to repay debt.
Our wholesale and other revenues are largely utility margin neutral as they are offset by changes in fuel, purchased supply and direct transmission expenses. 54 LIQUIDITY AND CAPITAL RESOURCES Liquidity We require liquidity to support and grow our business, and use our liquidity for working capital needs, capital expenditures, investments in or acquisitions of assets, and to repay debt.
The amortization of these amounts are offset in retail revenue. • Transmission: Reflects transmission revenues regulated by the FERC. • Wholesale and other are largely utility margin neutral as they are offset by changes in fuel, purchased supply and direct transmission expense. Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 Revenues Change MWHs Avg.
The amortization of these amounts are offset in retail revenue. • Transmission: Reflects transmission revenues regulated by the FERC. • Wholesale and other are largely utility margin neutral as they are offset by changes in fuel, purchased supply and direct transmission expense. Year Ended December 31, 2024 Compared with Year Ended December 31, 2023 Revenues Change MWHs Avg.
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, 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.
As costs are incurred under the AOC, the surety bonds will be reduced. 60 CRITICAL ACCOUNTING ESTIMATES Management's discussion and analysis of financial condition and results of operations is based on our Consolidated Financial Statements, which have been prepared in accordance with GAAP.
As costs are incurred under the AOC, the surety bonds will be reduced. 59 CRITICAL ACCOUNTING ESTIMATES Management's discussion and analysis of financial condition and results of operations is based on our Consolidated Financial Statements, which have been prepared in accordance with GAAP.
The amortization of these amounts are offset in retail revenue. • Wholesale: Primarily represents transportation and storage for others. Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 Revenues Change Dekatherms Avg.
The amortization of these amounts are offset in retail revenue. • Wholesale: Primarily represents transportation and storage for others. Year Ended December 31, 2024 Compared with Year Ended December 31, 2023 Revenues Change Dekatherms Avg.
See Note 12 - Income Taxes to the Consolidated Financial Statements for further discussion. 62 NEW ACCOUNTING STANDARDS See Note 2 - Significant Accounting Policies , to the Consolidated Financial Statements, included in Item 8 herein for a discussion of new accounting standards. 63
See Note 12 - Income Taxes to the Consolidated Financial Statements for further discussion. 61 NEW ACCOUNTING STANDARDS See Note 2 - Significant Accounting Policies , to the Consolidated Financial Statements, included in Item 8 herein for a discussion of new accounting standards. 62
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.
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.
We have assumed an average interest rate of 6.71 percent on the outstanding balance through maturity of the credit facilities. (6) Represents significant firm purchase commitments for construction of planned capital projects. (7) The table above excludes potential tax payments related to uncertain tax positions as they are not practicable to estimate.
We have assumed an average interest rate of 5.71 percent on the outstanding balance through maturity of the credit facilities. (6) Represents significant firm purchase commitments for construction of planned capital projects. (7) The table above excludes potential tax payments related to unrecognized tax benefits as they are not practicable to estimate.
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.
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.
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: • A $0.8 million favorable reduction in costs for the current contract year to record the annual adjustment for actual output and pricing as compared with a $1.8 million favorable reduction in costs in the prior period; and • 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 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.
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.
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 13.0 percent to 17.0 percent in 2025.
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.
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.
Long-term Debt and Equity 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.
Long-term Debt and Equity 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.
These costs are normally fairly stable across broad volume ranges and therefore do not normally increase or decrease significantly in the short term with increases or decreases in volumes. 47 OVERALL CONSOLIDATED RESULTS Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 Consolidated net income in 2023 was $194.1 million as compared with $183.0 million in 2022, an increase of $11.1 million.
These costs are normally fairly stable across broad volume ranges and therefore do not normally increase or decrease significantly in the short term with increases or decreases in volumes. 46 OVERALL CONSOLIDATED RESULTS Year Ended December 31, 2024 Compared with Year Ended December 31, 2023 Consolidated net income in 2024 was $224.1 million as compared with $194.1 million in 2023, an increase of $30.0 million.
As of February 9, 2024, our current ratings with these agencies are as follows: 58 Issuer Rating Senior Secured Rating Senior Unsecured Rating Outlook NorthWestern Energy Group Fitch (1)(2) BBB - BBB Stable Moody’s - - - - S&P (2) BBB - - Stable NW Corp Fitch (1)(2) BBB A- BBB+ Stable Moody’s (2) Baa2 A3 Baa2 Stable S&P (2) BBB A- - Stable NWE Public Service Fitch (1)(2) BBB A- BBB+ Stable Moody’s (2) Baa2 A3 - Stable S&P (2) BBB A- - Stable (1) This Fitch Issuer Rating represents the Issuer Default Rating.
As of February 7, 2025, our current ratings with these agencies are as follows: 57 Issuer Rating Senior Secured Rating Senior Unsecured Rating Outlook NorthWestern Energy Group Fitch (1) BBB - BBB Stable Moody’s - - - - S&P BBB - - Stable NW Corp Fitch (1) BBB A- BBB+ Stable Moody’s Baa2 A3 Baa2 Stable S&P BBB A- - Stable NWE Public Service Fitch (1) BBB A- BBB+ Stable Moody’s Baa2 A3 - Stable S&P BBB A- - Stable (1) This Fitch Issuer Rating represents the Issuer Default Rating.
See "Non-GAAP Financial Measure" above. Also see "Overall Consolidated Results" above for reconciliation of gross margin to utility margin. Lower retail volumes were driven by unfavorable weather in Montana, partly offset by favorable weather in Nebraska and customer growth.
See "Non-GAAP Financial Measure" above. Also see "Overall Consolidated Results" above for reconciliation of gross margin to utility margin. Lower retail volumes were driven by unfavorable weather in all jurisdictions partly offset by customer growth.
These commitments range from one to 24 years. 59 The energy supply costs incurred under these contracts are generally recoverable through rate mechanisms approved by the MPSC, as further described in Note 3 - Regulatory Matters . (5) Contractual interest payments include our revolving credit facilities, which have a variable interest rate.
The energy supply costs incurred under these contracts are generally recoverable through rate mechanisms approved by the MPSC, as further described in Note 3 - Regulatory Matters . 58 (5) Contractual interest payments include our revolving credit facilities, which have a variable interest rate.
(4) We have entered into various purchase commitments, largely purchased power, electric transmission, coal and natural gas supply and natural gas transportation contracts (exclusive of the qualifying facilities liability discussed above).
(4) We have entered into various purchase commitments, largely purchased power, electric transmission, coal and natural gas supply and natural gas transportation contracts (exclusive of the qualifying facilities liability discussed above). These commitments range from one to 24 years.
Cost Sensitivity The following table reflects the sensitivity of pension costs to changes in certain actuarial assumptions (in thousands): Actuarial Assumption Change in Assumption Impact on Pension Cost Impact on Projected Benefit Obligation Discount rate increase 0.25 % $ 14 $ (12,846) Discount rate decrease (0.25) % 1,059 13,473 Rate of return on plan assets increase 0.25 % (1,040) N/A Rate of return on plan assets decrease (0.25) % 1,040 N/A Accounting Treatment We recognize the funded status of each plan as an asset or liability in the Consolidated Balance Sheets.
Cost Sensitivity The following table reflects the sensitivity of pension costs to changes in certain actuarial assumptions (in thousands): Actuarial Assumption Change in Assumption Impact on Pension Cost Impact on Projected Benefit Obligation Discount rate increase 0.25 % $ 195 $ (11,443) Discount rate decrease (0.25) % 1,171 11,973 Rate of return on plan assets increase 0.25 % (982) N/A Rate of return on plan assets decrease (0.25) % 982 N/A Accounting Treatment We recognize the funded status of each plan as an asset or liability in the Consolidated Balance Sheets.
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.
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.
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. 61 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.
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. 60 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.
(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.
(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.
Cash Flows The following table summarizes our consolidated cash flows (in millions): Year Ended December 31, 2023 2022 Operating Activities Net income $ 194.1 $ 183.0 Non-cash adjustments to net income 210.1 183.1 Changes in working capital 115.6 (37.0) Other noncurrent assets and liabilities (30.6) (21.9) Cash Provided by Operating Activities 489.2 307.2 Investing Activities Property, plant and equipment additions (566.9) (515.1) Investment in equity securities (3.9) (1.7) Cash Used in Investing Activities (570.8) (516.8) Financing Activities Proceeds from issuance of common stock, net 73.6 277.0 Issuance of long-term debt 300.0 — Dividends on common stock (154.1) (140.1) Line of credit (repayments) borrowings, net (132.0) 77.0 Financing costs (4.3) (1.2) Other 1.1 0.6 Cash Provided by Financing Activities 84.3 213.3 Net Increase in Cash, Cash Equivalents, and Restricted Cash $ 2.7 $ 3.7 Cash, Cash Equivalents, and Restricted Cash, beginning of period $ 22.5 $ 18.8 Cash, Cash Equivalents, and Restricted Cash, end of period $ 25.2 $ 22.5 56 Operating Activities 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 Flows The following table summarizes our consolidated cash flows (in millions): Year Ended December 31, 2024 2023 Operating Activities Net income $ 224.1 $ 194.1 Non-cash adjustments to net income 213.5 210.1 Changes in working capital (18.9) 115.6 Other noncurrent assets and liabilities (11.9) (30.6) Cash Provided by Operating Activities 406.8 489.2 Investing Activities Property, plant and equipment additions (549.3) (566.9) Other investing activity (5.2) (3.9) Cash Used in Investing Activities (554.5) (570.8) Financing Activities Proceeds from issuance of common stock, net — 73.6 Issuance of long-term debt 215.0 300.0 Dividends on common stock (158.6) (154.1) Line of credit borrowings (repayments), net 95.0 (132.0) Financing costs (1.1) (4.3) Treasury stock activity 1.2 1.1 Cash Provided by Financing Activities 151.5 84.3 Net Increase in Cash, Cash Equivalents, and Restricted Cash $ 3.8 $ 2.7 Cash, Cash Equivalents, and Restricted Cash, beginning of period $ 25.2 $ 22.5 Cash, Cash Equivalents, and Restricted Cash, end of period $ 29.0 $ 25.2 55 Operating Activities 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.
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. 48 Primary components of the change in utility margin include the following (in millions): Utility Margin 2023 vs. 2022 Utility Margin Items Impacting Net Income Montana rate review - new base rates $ 32.6 Lower non-recoverable Montana electric supply costs 14.2 Montana property tax tracker collections 12.8 Higher Montana natural gas transportation 2.2 Higher electric transmission revenue due to market conditions 0.6 Lower natural gas retail volumes (7.0) Lower electric retail volumes (1.8) Other (1.7) Change in Utility Margin Impacting Net Income 51.9 Utility Margin Items Offset Within Net Income Lower property taxes recovered in revenue, offset in property tax expense (35.8) Lower operating expenses recovered in revenue, offset in operating and maintenance expense (3.1) Lower gas production taxes recovered in revenue, offset in property and other taxes (0.7) Higher revenue from lower production tax credits, offset in income tax expense 3.8 Change in Items Offset Within Net Income (35.8) Increase in Consolidated Utility Margin (1) $ 16.1 (1) Non-GAAP financial measure.
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. 47 Primary components of the change in utility margin include the following (in millions): Utility Margin 2024 vs. 2023 Utility Margin Items Impacting Net Income Base rates $ 62.4 Electric transmission revenue due to market conditions and rates 18.6 Montana interim rates (subject to refund) 4.8 Montana natural gas transportation 2.3 Montana property tax tracker collections 1.1 Non-recoverable Montana electric supply costs (7.9) QF liability adjustment (4.2) Natural gas retail volumes (4.0) Electric retail volumes (0.9) Other (3.0) Change in Utility Margin Impacting Net Income 69.2 Utility Margin Items Offset Within Net Income Property and other taxes recovered in revenue, offset in property and other taxes 6.4 Operating expenses recovered in revenue, offset in operating and maintenance expense 2.4 Production tax credits, offset in income tax expense 0.2 Change in Items Offset Within Net Income 9.0 Increase in Consolidated Utility Margin (1) $ 78.2 (1) Non-GAAP financial measure.
Heating Degree Days 2023 as compared with: 2023 2022 Historic Average 2022 Historic Average Montana (1) 7,478 8,194 7,791 9% warmer 4% warmer South Dakota 7,665 7,687 7,675 remained flat remained flat Nebraska 5,893 5,767 6,044 2% colder 2% warmer (1) Montana electric and natural gas heating degree days may differ due to differences in service territory. 54 The following summarizes the components of the changes in natural gas utility margin for the years ended December 31, 2023 and 2022 (in millions): Utility Margin 2023 vs. 2022 Utility Margin Items Impacting Net Income Montana property tax tracker collections $ 3.3 Montana rate review - new natural gas base rates 3.1 Higher Montana natural gas transportation 2.2 Lower retail volumes (7.0) Other (1.3) Change in Utility Margin Impacting Net Income 0.3 Utility Margin Items Offset Within Net Income Lower property taxes recovered in revenue, offset in property tax expense (7.7) Lower gas production taxes recovered in revenue, offset in property and other taxes (0.7) Higher operating expenses recovered in revenue, offset in operating and maintenance expense 0.2 Change in Items Offset Within Net Income (8.2) Decrease in Utility Margin (1) $ (7.9) (1) Non-GAAP financial measure.
Heating Degree Days 2024 as compared with: 2024 2023 Historic Average 2023 Historic Average Montana (1) 7,265 7,478 7,791 3% warmer 7% warmer South Dakota 6,501 7,665 7,724 15% warmer 16% warmer Nebraska 5,241 5,893 6,085 11% warmer 14% warmer (1) Montana electric and natural gas heating degree days may differ due to differences in service territory. 53 The following summarizes the components of the changes in natural gas utility margin for the years ended December 31, 2024 and 2023 (in millions): Utility Margin 2024 vs. 2023 Utility Margin Items Impacting Net Income Base rates 11.4 Montana natural gas transportation 2.3 Montana interim rates (subject to refund) 2.0 Retail volumes (4.0) Montana property tax tracker collections (0.1) Other (2.1) Change in Utility Margin Impacting Net Income 9.5 Utility Margin Items Offset Within Net Income Property and other taxes recovered in revenue, offset in property and other taxes 3.0 Operating expenses recovered in revenue, offset in operating and maintenance expense 0.7 Change in Items Offset Within Net Income 3.7 Increase in Utility Margin (1) $ 13.2 (1) Non-GAAP financial measure.
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.
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.
Cooling Degree Days 2023 as compared with: 2023 2022 Historic Average 2022 Historic Average Montana 441 602 455 27% cooler 3% cooler South Dakota 1,035 953 752 9% warmer 38% warmer Heating Degree Days 2023 as compared with: 2023 2022 Historic Average 2022 Historic Average Montana (1) 7,237 8,004 7,592 10% warmer 5% warmer South Dakota 7,665 7,687 7,675 remained flat remained flat (1) Montana electric and natural gas heating degree days may differ due to differences in service territory. 52 The following summarizes the components of the changes in electric utility margin for the years ended December 31, 2023 and 2022 (in millions): Utility Margin 2023 vs. 2022 Utility Margin Items Impacting Net Income Montana rate review - new electric base rates $ 29.5 Lower non-recoverable Montana electric supply costs 14.2 Montana property tax tracker collections 9.5 Higher electric transmission revenue due to market conditions 0.6 QF liability adjustment (0.1) Lower retail volumes (1.8) Other (0.3) Change in Utility Margin Items Impacting Net Income 51.6 Utility Margin Items Offset Within Net Income Lower property taxes recovered in revenue, offset in property tax expense (28.1) Lower operating expenses recovered in revenue, offset in operating and maintenance expense (3.3) Higher revenue from lower production tax credits, offset in income tax expense 3.8 Change in Items Offset Within Net Income (27.6) Increase in Utility Margin (1) $ 24.0 (1) Non-GAAP financial measure.
Cooling Degree Days 2024 as compared with: 2024 2023 Historic Average 2023 Historic Average Montana 485 441 448 10% warmer 8% warmer South Dakota 778 1,035 752 25% cooler 3% warmer Heating Degree Days 2024 as compared with: 2024 2023 Historic Average 2023 Historic Average Montana (1) 7,033 7,237 7,554 3% warmer 7% warmer South Dakota 6,501 7,665 7,724 15% warmer 16% warmer (1) Montana electric and natural gas heating degree days may differ due to differences in service territory. 51 The following summarizes the components of the changes in electric utility margin for the years ended December 31, 2024 and 2023 (in millions): Utility Margin 2024 vs. 2023 Utility Margin Items Impacting Net Income Base rates $ 51.0 Electric transmission revenue due to market conditions and rates 18.6 Montana interim rates (subject to refund) 2.8 Montana property tax tracker collections 1.2 Non-recoverable Montana electric supply costs (7.9) QF liability adjustment (4.2) Retail volumes (0.9) Other (0.9) Change in Utility Margin Items Impacting Net Income 59.7 Utility Margin Items Offset Within Net Income Property and other taxes recovered in revenue, offset in property and other taxes 3.4 Operating expenses recovered in revenue, offset in operating and maintenance expense 1.7 Production tax credits, offset in income tax expense 0.2 Change in Items Offset Within Net Income 5.3 Increase in Utility Margin (1) $ 65.0 (1) Non-GAAP financial measure.
For further information on our long-term debt, see Note 11 - Long- Term Debt and Finance Leases to the Consolidated Financial Statements included herein. We generally issue equity securities to fund long-term investment in our business.
For further information on our long-term debt, see Note 11 - Long-Term Debt and Finance Leases to the Consolidated Financial Statements included herein. We generally issue equity securities to fund long-term investment in our business. We evaluate our equity issuance needs to support our plan to maintain a 50 - 55 percent debt to total capital ratio excluding finance leases.
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.
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.
See "Non-GAAP Financial Measure" above. Year Ended December 31, 2023 2022 Change % Change (in millions) Utility Margin Electric $ 806.1 $ 782.1 $ 24.0 3.1 % Natural Gas 195.8 203.7 (7.9) (3.9) Total Utility Margin (1) $ 1,001.9 $ 985.8 $ 16.1 1.6 % (1) Non-GAAP financial measure. See "Non-GAAP Financial Measure" above.
See "Non-GAAP Financial Measure" above. Year Ended December 31, 2024 2023 Change % Change (in millions) Utility Margin Electric $ 871.1 $ 806.1 $ 65.0 8.1 % Natural Gas 209.0 195.8 13.2 6.7 Total Utility Margin (1) $ 1,080.1 $ 1,001.9 $ 78.2 7.8 % (1) Non-GAAP financial measure. See "Non-GAAP Financial Measure" above.
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. Consolidated other income in 2023 was $15.8 million, as compared with $19.4 million in 2022.
This increase was due to higher borrowings and interest rates, partly offset by higher capitalization of AFUDC. 49 Consolidated other income in 2024 was $23.0 million, as compared with $15.8 million in 2023.
Primary components of the change include the following (in millions): Operating Expenses 2023 vs. 2022 Operating Expenses (excluding fuel, purchased supply and direct transmission expense) Impacting Net Income Higher depreciation expense due to plant additions $ 15.5 Higher labor and benefits expense, partly offset by higher capitalization of labor and benefits costs (1) 6.1 Higher insurance expense 2.1 Increase in uncollectible accounts 1.1 Higher expenses at our electric generation facilities 1.0 Higher cost of materials 0.8 Lower property and other taxes not recoverable within trackers (3.0) Other 3.3 Change in Items Impacting Net Income 26.9 Operating Expenses Offset Within Net Income Lower property and other taxes recovered in trackers, offset in revenue (35.8) Lower pension and other postretirement benefits, offset in other income (1) (8.7) Lower operating expenses recovered in trackers, offset in revenue (3.1) Lower natural gas production taxes recovered in trackers, offset in revenue (0.7) Higher deferred compensation, offset in other income 0.1 Change in Items Offset Within Net Income (48.2) Decrease in Operating Expenses (excluding fuel, purchased supply and direct transmission expense) $ (21.3) (1) In order to present the total change in labor and benefits, we have included the change in the non-service cost component of our pension and other postretirement benefits, which is recorded within other income on our Condensed Consolidated Statements of Income.
Primary components of the change include the following (in millions): Operating Expenses 2024 vs. 2023 Operating Expenses (excluding fuel, purchased supply and direct transmission expense) Impacting Net Income Depreciation expense due to plant additions and higher depreciation rates $ 17.1 Labor and benefits (1) 7.9 Insurance expense, primarily due to increased wildfire risk premiums 7.7 Property and other taxes not recoverable within trackers 4.4 Litigation outcome (Pacific Northwest Solar) 2.4 Electric generation maintenance 2.0 Non-cash impairment of alternative energy storage investment 1.7 Technology implementation and maintenance 1.5 Uncollectible accounts (1.4) Other (2.3) Change in Items Impacting Net Income 41.0 Operating Expenses Offset Within Net Income Property and other taxes recovered in trackers, offset in revenue 6.4 Pension and other postretirement benefits, offset in other income (1) 4.8 Operating and maintenance expenses recovered in trackers, offset in revenue 2.4 Deferred compensation, offset in other income 0.7 Change in Items Offset Within Net Income 14.3 Increase in Operating Expenses (excluding fuel, purchased supply and direct transmission expense) $ 55.3 (1) In order to present the total change in labor and benefits, we have included the change in the non-service cost component of our pension and other postretirement benefits, which is recorded within other income on our Condensed Consolidated Statements of Income.
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.
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.
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.
See "Non-GAAP Financial Measure" above. 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.
Electric Natural Gas Total 2023 2022 2023 2022 2023 2022 (in millions) Reconciliation of gross margin to utility margin: Operating Revenues $ 1,068.8 $ 1,106.5 $ 353.3 $ 371.3 $ 1,422.1 $ 1,477.8 Less: Fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion shown separately below) 262.7 324.4 157.5 167.6 420.2 492.0 Less: Operating and maintenance 166.0 167.8 54.5 53.6 220.5 221.4 Less: Property and other taxes 120.3 149.8 34.3 42.7 154.6 192.5 Less: Depreciation and depletion 174.1 162.4 36.4 32.6 210.5 195.0 Gross Margin 345.7 302.1 70.6 74.8 416.3 376.9 Operating and maintenance 166.0 167.8 54.5 53.6 220.5 221.4 Property and other taxes 120.3 149.8 34.3 42.7 154.6 192.5 Depreciation and depletion 174.1 162.4 36.4 32.6 210.5 195.0 Utility Margin (1) $ 806.1 $ 782.1 $ 195.8 $ 203.7 $ 1,001.9 $ 985.8 (1) Non-GAAP financial measure.
Electric Natural Gas Total 2024 2023 2024 2023 2024 2023 (in millions) Reconciliation of gross margin to utility margin: Operating Revenues $ 1,200.7 $ 1,068.8 $ 313.2 $ 353.3 $ 1,513.9 $ 1,422.1 Less: Fuel, purchased supply and direct transmission expense (exclusive of depreciation and depletion shown separately below) 329.6 262.7 104.2 157.5 433.8 420.2 Less: Operating and maintenance 171.7 166.0 56.1 54.5 227.8 220.5 Less: Property and other taxes 126.5 120.3 37.4 34.3 163.9 154.6 Less: Depreciation and depletion 190.0 174.1 37.6 36.4 227.6 210.5 Gross Margin 382.9 345.7 77.9 70.6 460.8 416.3 Operating and maintenance 171.7 166.0 56.1 54.5 227.8 220.5 Property and other taxes 126.5 120.3 37.4 34.3 163.9 154.6 Depreciation and depletion 190.0 174.1 37.6 36.4 227.6 210.5 Utility Margin (1) $ 871.1 $ 806.1 $ 209.0 $ 195.8 $ 1,080.1 $ 1,001.9 (1) Non-GAAP financial measure.
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.
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.
Based on the significant NOL we generated during the year ended December 31, 2023, we anticipate paying minimal cash for income taxes into 2028.
Based on the significant NOL income tax position we have, we anticipate paying minimal cash for income taxes into 2028.
We utilize availability under our revolving credit facilities to manage our cash flows due to the seasonality of our business and to fund capital investment. Cash on hand in excess of current operating requirements is generally used to invest in our business and reduce borrowings.
Credit Facilities Liquidity is generally provided by internal operating cash flows and the use of our unsecured revolving credit facilities. We utilize availability under our revolving credit facilities to manage our cash flows due to the seasonality of our business and to fund capital investment.
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. 46 RESULTS OF OPERATIONS Our consolidated results include the results of our divisions and subsidiaries constituting each of our business segments.
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. 45 RESULTS OF OPERATIONS Our consolidated results include the results of our divisions and subsidiaries constituting each of our business segments.
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.
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.
Year Ended December 31, 2023 2022 Change % Change (in millions) Operating Expenses (excluding fuel, purchased supply and direct transmission expense) Operating and maintenance $ 220.5 $ 221.4 $ (0.9) (0.4) % Administrative and general 117.3 113.8 3.5 3.1 Property and other taxes 153.1 192.5 (39.4) (20.5) Depreciation and depletion 210.5 195.0 15.5 7.9 Total Operating Expenses (excluding fuel, purchased supply and direct transmission expense) $ 701.4 $ 722.7 $ (21.3) (2.9) % 49 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.
The 2023-2024 contract year was the last year of the contract that contains variable pricing terms. 48 Year Ended December 31, 2024 2023 Change % Change (in millions) Operating Expenses (excluding fuel, purchased supply and direct transmission expense) Operating and maintenance $ 227.8 $ 220.5 $ 7.3 3.3 % Administrative and general 137.4 117.3 20.1 17.1 Property and other taxes 163.9 153.1 10.8 7.1 Depreciation and depletion 227.6 210.5 17.1 8.1 Total Operating Expenses (excluding fuel, purchased supply and direct transmission expense) $ 756.7 $ 701.4 $ 55.3 7.9 % 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.
Our credit facilities may also be utilized for funding cash requirements during seasonally active construction periods, with peak activity during warmer months.
Our credit facilities may also be utilized for funding cash requirements during seasonally active construction periods, with peak activity during warmer months. Our cash requirements also include a variety of contractual obligations as outlined below in the “Contractual Obligations and Other Commitments” section.
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.
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.
With the exception of maturities of long-term debt, we anticipate funding these obligations through cash flows from operations. The following table summarizes our contractual cash obligations and commitments as of December 31, 2023. See additional discussion in Note 18 - Commitments and Contingencies to the Consolidated Financial Statements.
Contractual Obligations and Other Commitments We have a variety of contractual obligations and other commitments that require payment of cash at certain specified periods. With the exception of maturities of long-term debt, we anticipate funding these obligations through cash flows from operations. The following table summarizes our contractual cash obligations and commitments as of December 31, 2024.
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. Credit Facilities Liquidity is generally provided by internal operating cash flows and the use of our unsecured revolving credit facilities.
Events such as these could cause us to defer a portion of our planned capital expenditures, as necessary. To fund our strategic 56 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.
Such rating may be subject to revision or withdrawal at any time by the credit rating agency and each rating should be evaluated independently of any other rating. Contractual Obligations and Other Commitments We have a variety of contractual obligations and other commitments that require payment of cash at certain specified periods.
A security rating is not a recommendation to buy, sell or hold securities. Such rating may be subject to revision or withdrawal at any time by the credit rating agency and each rating should be evaluated independently of any other rating.
Our cash requirements also include a variety of contractual obligations as outlined below in the “Contractual Obligations and Other Commitments” section. 57 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 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.
For further information on our credit facilities, see Note 10 - Unsecured Credit Facilities to the Consolidated Financial Statements included herein.
For further information regarding equity, see Note 16 - Common Stock to the Consolidated Financial Statements included herein.
The following table presents additional information about borrowings under our revolving credit facilities during the year ended December 31, 2023 (in millions): Amount outstanding at year end $ 318.0 Daily average amount outstanding $ 228.4 Maximum amount outstanding $ 490.0 Minimum amount outstanding $ 54.0 As discussed further within Note 10 - Unsecur ed Credit Fa cilities , our credit facility availability as of December 31, 2023 was $232.0 million.
The following table presents additional information about borrowings under our revolving credit facilities during the year ended December 31, 2024 (in millions): Amount outstanding at year end $ 413.0 Daily average amount outstanding $ 237.1 Maximum amount outstanding $ 413.0 Minimum amount outstanding $ 69.0 As of February 7, 2025, availability under our revolving credit facilities was approximately $233.0 million, and there were no letters of credit outstanding.
As discussed above in the “Significant Infrastructure Investments and Initiatives” section, our capital expenditures are forecasted to be $500 million in 2024. Financing Activities 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.
Financing Activities 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.
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.
See "Non-GAAP Financial Measure" above. Also see "Overall Consolidated Results" above for reconciliation of gross margin to utility margin. 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.
This change is offset within this table as it does not affect our operating expenses. Consolidated operating income in 2023 was $300.5 million as compared with $263.1 million in 2022.
This change is offset within this table as it does not affect our operating expenses. 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.
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.
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.
Customer Counts 2023 2022 $ % 2023 2022 2023 2022 (in thousands) Montana $ 136,097 $ 152,343 (16,246) (10.7) % 14,008 15,319 183,810 181,879 South Dakota 36,638 39,178 (2,540) (6.5) 3,179 3,280 42,053 41,524 Nebraska 35,539 35,756 (217) (0.6) 2,581 2,558 37,793 37,693 Residential 208,274 227,277 (19,003) (8.4) 19,768 21,157 263,656 261,096 Montana 73,721 79,274 (5,553) (7.0) 8,036 8,329 25,725 25,319 South Dakota 25,869 28,487 (2,618) (9.2) 3,169 2,981 7,232 7,058 Nebraska 22,114 22,071 43 0.2 1,916 1,846 5,023 5,003 Commercial 121,704 129,832 (8,128) (6.3) 13,121 13,156 37,980 37,380 Industrial 1,392 1,520 (128) (8.4) 157 163 232 232 Other 1,681 1,932 (251) (13.0) 209 232 190 178 Total Retail Gas $ 333,051 $ 360,561 $ (27,510) (7.6) % 33,255 34,708 302,058 298,886 Regulatory amortization (25,012) (27,964) 2,952 (10.6) Wholesale and other 45,271 38,675 6,596 17.1 Total Revenues $ 353,310 $ 371,272 $ (17,962) (4.8) % Fuel, purchased supply and direct transmission expense (1) 157,507 167,577 (10,070) (6.0) Utility Margin (2) $ 195,803 $ 203,695 $ (7,892) (3.9) % (1) Exclusive of depreciation and depletion.
Customer Counts 2024 2023 $ % 2024 2023 2024 2023 (in thousands) Montana $ 110,215 $ 136,097 (25,882) (19.0) % 13,749 14,008 185,644 183,810 South Dakota 26,884 36,638 (9,754) (26.6) 2,709 3,179 42,577 42,053 Nebraska 21,205 35,539 (14,334) (40.3) 2,294 2,581 37,958 37,793 Residential 158,304 208,274 (49,970) (24.0) 18,752 19,768 266,179 263,656 Montana 59,925 73,721 (13,796) (18.7) 7,782 8,036 26,164 25,725 South Dakota 18,069 25,869 (7,800) (30.2) 2,791 3,169 7,383 7,232 Nebraska 11,432 22,114 (10,682) (48.3) 1,664 1,916 5,056 5,023 Commercial 89,426 121,704 (32,278) (26.5) 12,237 13,121 38,603 37,980 Industrial 1,041 1,392 (351) (25.2) 147 157 237 232 Other 1,352 1,681 (329) (19.6) 207 209 197 190 Total Retail Gas $ 250,123 $ 333,051 $ (82,928) (24.9) % 31,343 33,255 305,216 302,058 Regulatory amortization 19,017 (25,012) 44,029 (176.0) Wholesale and other 44,057 45,271 (1,214) (2.7) Total Revenues $ 313,197 $ 353,310 $ (40,113) (11.4) % Fuel, purchased supply and direct transmission expense (1) 104,238 157,507 (53,269) (33.8) Utility Margin (2) $ 208,959 $ 195,803 $ 13,156 6.7 % (1) Exclusive of depreciation and depletion.
Customer Counts 2023 2022 $ % 2023 2022 2023 2022 (in thousands) Montana $ 408,341 $ 357,384 $ 50,957 14.3 % 2,795 2,868 322,489 316,968 South Dakota 67,888 69,809 (1,921) (2.8) 603 596 51,261 51,069 Residential 476,229 427,193 49,036 11.5 3,398 3,464 373,750 368,037 Montana 431,357 368,634 62,723 17.0 3,238 3,237 74,438 73,093 South Dakota 103,194 108,202 (5,008) (4.6) 1,101 1,114 12,973 12,897 Commercial 534,551 476,836 57,715 12.1 4,339 4,351 87,411 85,990 Industrial 45,958 39,773 6,185 15.6 2,660 2,590 79 76 Other 32,756 31,007 1,749 5.6 134 161 6,443 6,406 Total Retail Electric $ 1,089,494 $ 974,809 $ 114,685 11.8 % 10,531 10,566 467,683 460,509 Regulatory amortization (105,608) 46,382 (151,990) (327.7) Transmission 78,436 77,791 645 0.8 Wholesale and Other 6,511 7,583 (1,072) (14.1) Total Revenues $ 1,068,833 $ 1,106,565 $ (37,732) (3.4) % Fuel, purchased supply and direct transmission expense (1) 262,755 324,434 (61,679) (19.0) Utility Margin (2) $ 806,078 $ 782,131 $ 23,947 3.1 % (1) Exclusive of depreciation and depletion.
Customer Counts 2024 2023 $ % 2024 2023 2024 2023 (in thousands) Montana $ 398,790 $ 408,341 $ (9,551) (2.3) % 2,804 2,795 328,420 322,489 South Dakota 70,012 67,888 2,124 3.1 557 603 51,467 51,261 Residential 468,802 476,229 (7,427) (1.6) 3,361 3,398 379,887 373,750 Montana 408,977 431,357 (22,380) (5.2) 3,197 3,238 75,878 74,438 South Dakota 111,813 103,194 8,619 8.4 1,093 1,101 13,084 12,973 Commercial 520,790 534,551 (13,761) (2.6) 4,290 4,339 88,962 87,411 Industrial 46,637 45,958 679 1.5 2,924 2,660 80 79 Other 32,811 32,756 55 0.2 146 134 6,544 6,443 Total Retail Electric $ 1,069,040 $ 1,089,494 $ (20,454) (1.9) % 10,721 10,531 475,473 467,683 Regulatory amortization 24,908 (105,608) 130,516 (123.6) Transmission 97,052 78,436 18,616 23.7 Wholesale and Other 9,701 6,511 3,190 49.0 Total Revenues $ 1,200,701 $ 1,068,833 $ 131,868 12.3 % Fuel, purchased supply and direct transmission expense (1) 329,578 262,755 66,823 25.4 Utility Margin (2) $ 871,123 $ 806,078 $ 65,045 8.1 % (1) Exclusive of depreciation and depletion.
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.
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.
Total 2024 2025 2026 2027 2028 Thereafter (in thousands) Long-term debt (1) $ 2,797,660 $ 100,000 $ 300,000 $ 105,000 $ — $ 497,660 $ 1,795,000 Finance leases 8,799 3,338 3,596 1,865 — — — Estimated pension and other postretirement obligations (2) 57,402 12,554 11,437 11,137 11,137 11,137 N/A QF liability (3) 303,062 74,110 60,360 55,393 56,665 42,400 14,134 Supply and capacity contracts (4) 2,828,615 321,853 244,091 263,407 243,576 225,916 1,529,772 Contractual interest payments on debt (5) 1,592,745 123,354 114,385 108,295 106,636 101,968 1,038,107 Commitments for significant capital projects (6) 45,945 45,945 — — — — $ — Total Commitments (7) $ 7,634,228 $ 681,154 $ 733,869 $ 545,097 $ 418,014 $ 879,081 $ 4,377,013 (1) Represents cash payments for long-term debt and excludes $13.1 million of debt discounts and debt issuance costs, net.
Total 2025 2026 2027 2028 2029 Thereafter (in thousands) Long-term debt (1) $ 3,007,660 $ 300,000 $ 105,000 $ — $ 592,660 $ 33,000 $ 1,977,000 Finance leases 5,461 3,596 1,865 — — — — Short-term borrowings 100,000 100,000 — — — — — Estimated pension and other postretirement obligations (2) 50,310 11,310 9,750 9,750 9,750 9,750 N/A QF liability (3) 228,952 60,360 55,393 56,665 42,400 14,134 — Supply and capacity contracts (4) 4,228,637 345,821 365,202 350,381 349,347 350,201 2,467,685 Contractual interest payments on debt (5) 1,650,442 133,927 122,884 120,847 118,780 89,359 1,064,645 Commitments for significant capital projects (6) 66,837 57,975 8,862 — — — $ — Total Commitments (7) $ 9,338,299 $ 1,012,989 $ 668,956 $ 537,643 $ 1,112,937 $ 496,444 $ 5,509,330 (1) Represents cash payments for long-term debt and excludes $12.4 million of debt discounts and debt issuance costs, net.
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. Consolidated income tax expense in 2023 was $7.5 million, as compared to an income tax benefit of $0.6 million in 2022.
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.
Removed
As described in more detail below, 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, higher interest expense, higher operating, maintenance, and administrative expenses, and higher income tax expense.
Added
Beginning in 2021, we began installing automated metering infrastructure in Montana.
Removed
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.
Added
This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenue, and income tax benefits related to the gas repairs safe harbor method and a reduction in our unrecognized tax benefits.
Removed
See "Non-GAAP Financial Measure" above. Lower non-recoverable Montana electric supply costs were driven by higher electric supply revenues, lower electric supply costs, and $3.2 million for the retroactive application of higher PCCAM base rates approved in the Montana rate review.
Added
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, administrative and general costs, and interest expense. 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.
Removed
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.
Added
Lower natural gas retail volumes were driven by unfavorable weather in all jurisdictions partly offset by customer growth. 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.
Removed
See "Non-GAAP Financial Measure" above. Also see "Overall Consolidated Results" above for reconciliation of gross margin to utility margin. Lower non-recoverable Montana electric supply costs were driven by higher electric supply revenues, lower electric supply costs, and $3.2 million for the retroactive application of higher PCCAM base rates approved in the Montana rate review.
Added
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).
Removed
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.
Added
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.
Removed
Net under-collected supply costs (in millions) Beginning of year End of year Net cash inflows 2022 $ 99.1 $ 115.4 $ (16.3) 2023 $ 115.4 $ 7.8 $ 107.6 Improvement in annual net cash inflows $ 123.9 As discussed above, on October 27, 2023 the MPSC issued their final order approving our Montana rate review settlement which included an update to the PCCAM by adjusting the base costs from $138.7 million to $208.4 million and providing for more timely quarterly recovery of deferred balances instead of annual recovery.
Added
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. Consol idated interest expense in 2024 was $131.7 million, as compared with $114.6 million in 2023.
Removed
The updated $208.4 million PCCAM Base is retroactive to an effective date of July 1, 2022. As of December 31, 2023, we have under-collected our total Montana electric supply costs for the July 2022 through June 2023 PCCAM year by approximately $14.5 million that we began collecting in October 2023.
Added
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).
Removed
As of December 31, 2023, we have over-collected our total Montana electric supply costs for the July 2023 through June 2024 PCCAM year by approximately $4.7 million. With the adjusted PCCAM Base, we anticipate continued improvements in our cash flows from operations.
Added
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are unable to obtain capital on reasonable terms, it may limit or prohibit our ability to finance capital expenditures and repay maturing long-term debt. Our liquidity needs could exceed our short-term credit availability and lead to defaults on various financing arrangements. We would also likely be prohibited from paying dividends on our common stock.
Biggest changeOur liquidity needs could exceed our short-term credit availability and lead to defaults on various financing arrangements. We would also likely be prohibited from paying dividends on our common stock. We are subject to financial risks associated with the transition to a lower carbon economy. The risks related to our transition to a lower-carbon economy, creates financial risk.
The U.S. is a party to the United Nations' "Paris Agreement" on climate change, and that agreement along with other potential legislation and regulation discussed above, could result in enforceable GHG emission reduction requirements that could lead to increased compliance costs for us.
Although the U.S. is no longer a party to the United Nations' "Paris Agreement" on climate change, other potential legislation and regulation discussed above, could result in enforceable GHG emission reduction requirements that could lead to increased compliance costs for us.
See discussion related to our Yellowstone County Generating Station below in “Management’s Discussion and Analysis – Significant Trends and Regulation.” Adverse litigation outcomes could cause us to delay or terminate projects, increase costs and impact our ability to service our customers.
See discussion related to YCGS below in “Management’s Discussion and Analysis – Significant Trends and Regulation.” Adverse litigation outcomes could cause us to delay or terminate projects, increase costs and impact our ability to service our customers.
We believe that we are in compliance with environmental regulatory requirements. In response to recent regulatory and judicial decisions and international accords, GHG emissions, most significantly CO 2 , could be restricted in the future as a result of federal or state legal requirements or litigation relating to GHG emissions.
In response to recent regulatory and judicial decisions and international accords, GHG emissions, most significantly CO 2 , could be restricted in the future as a result of federal or state legal requirements or litigation relating to GHG emissions.
Wage inflation nationally and increased competitive labor markets may make it difficult to attract employees. Failure to identify qualified replacement employees could result in decreased productivity and increased safety costs. If we are unable to attract and retain an appropriately qualified workforce, our operations could be negatively affected. We are also subject to multiple collective bargaining agreements.
Failure to identify qualified replacement employees could result in decreased productivity and increased safety costs. If we are unable to attract and retain an appropriately qualified workforce, our operations could be negatively affected. We are also subject to multiple collective bargaining agreements.
Reductions in usage, attributable to various factors could materially affect our results of operations, financial position, and cash flows through, among other things, reduced operating revenues, increased operating and maintenance expenses, and increased capital expenditures, as well as potential asset impairment charges or accelerated depreciation and decommissioning expenses over shortened remaining asset useful lives. 31 Demand for our Montana transmission capacity fluctuates with regional demand, fuel prices and weather related conditions.
Reductions in usage, attributable to various factors could materially affect our results of operations, financial position, and cash flows through, among other things, reduced operating revenues, increased operating and maintenance expenses, and increased capital expenditures, as well as potential asset impairment charges or accelerated depreciation and decommissioning expenses over shortened remaining asset useful lives.
Cyber and physical attacks, threats of terrorism and catastrophic events that could result from terrorism, or individuals and/or groups attempting to disrupt our business, or the businesses of third parties, may affect our operations in unpredictable ways and could adversely affect our liquidity and results of operations. Failure to maintain the security of personally identifiable information could adversely affect us.
These events could adversely affect our results of operations, financial position and cash flows. 31 Cyber and physical attacks, threats of terrorism and catastrophic events that could result from terrorism, or individuals and/or groups attempting to disrupt our business, or the businesses of third parties, may affect our operations in unpredictable ways and could adversely affect our liquidity and results of operations.
Issues include higher prices, scarcities/shortages, longer fulfillment times for orders from our suppliers, workforce availability, and wage increases. 32 Should these economic conditions and issues continue, we could have difficulty completing the operational activities necessary to serve our customers safely and reliably, and/or achieving our capital investment program, which ultimately could result in higher customer utility rates, longer outages, and could have a material adverse impact on our business, financial condition and operations.
Should these economic conditions and issues continue, we could have difficulty completing the operational activities necessary to serve our customers safely and reliably, and/or achieving our capital investment program, which ultimately could result in higher customer utility rates, longer outages, and could have a material adverse impact on our business, financial condition and operations. 32 Failure to attract and retain an appropriately qualified workforce could affect our operations.
Our assets and the information technology systems on which they depend could be direct targets of, or indirectly affected by, cyber attacks and other disruptive activities, including those that impact third party facilities that are interconnected to us.
The advancement of artificial intelligence and large language models has given rise to additional vulnerabilities and potential entry points for cyber crime. Our assets and the information technology systems on which they depend could be direct targets of, or indirectly affected by, cyber attacks and other disruptive activities, including those that impact third party facilities that are interconnected to us.
Failure to attract and retain an appropriately qualified workforce could affect our operations. We require skilled labor to perform specialized utility functions. Turnover of key employees without appropriate replacements may lead to operating challenges and increased costs. Some of the challenges include lack of resources, loss of knowledge, and time required for replacement employees to develop necessary skills.
We require skilled labor to perform specialized utility functions. Turnover of key employees without appropriate replacements may lead to operating challenges and increased costs. Some of the challenges include lack of resources, loss of knowledge, and time required for replacement employees to develop necessary skills. Wage inflation nationally and increased competitive labor markets may make it difficult to attract employees.
Business Operations - We are subject to the potentially adverse operating and financial effects of terrorist acts and threats, as well as cyber attacks, physical security breaches and other disruptive activities of individuals or groups, and theft of our critical infrastructure information. Our generation, transmission and distribution facilities are deemed critical infrastructure and provide the framework for our service infrastructure.
Failure to maintain the security of personally identifiable information could adversely affect us. Business Operations - We are subject to the potentially adverse operating and financial effects of terrorist acts and threats, as well as cyber attacks, physical security breaches and other disruptive activities of individuals or groups, and theft of our critical infrastructure information.
These risks are often interconnected, representing policy and regulatory changes, technology and market risks, and risks to our reputation and financial performance. Potential regulation associated with climate change legislation could pose financial risks to us.
Transition risks represent those risks related to the social and economic changes needed to shift toward a lower carbon future. These risks are often interconnected, representing policy and regulatory changes, technology and market risks, and risks to our reputation and financial performance. Potential regulation associated with climate change legislation could pose financial risks to us.
As a result of current macroeconomic conditions, both nationally and globally, we have recently experienced issues with our supply chain for materials and components used in our operations and capital project construction activities.
As a result of current macroeconomic conditions, both nationally and globally, we have recently experienced issues with our supply chain for materials and components used in our operations and capital project construction activities. Issues include higher prices, potential tariffs, scarcities/shortages, longer fulfillment times for orders from our suppliers, workforce availability, and wage increases.
Climate change and the costs that may be associated with its impacts have the potential to affect our business in many ways, including increasing the cost incurred in providing electricity and natural gas, impacting the demand for and consumption of electricity and natural gas (due to change in both costs and weather patterns), and affecting the economic health of the regions in which we operate. 30 Extreme weather conditions, especially those of prolonged duration, create high energy demand on our own and/or other systems and increase the risk we may be unable to reliably serve customers, causing brownouts and/or blackouts of our electric systems, and loss of gas supply.
Climate change and the costs that may be associated with its impacts have the potential to affect our business in many ways, including increasing the cost incurred in providing electricity and natural gas, impacting the demand for and consumption of electricity and natural gas (due to change in both costs and weather patterns), and affecting the economic health of the regions in which we operate.
The intermittency of renewables remains a critical challenge particularly as cost-efficient energy storage is still in development. Other technology risks include the need for significant upfront financial investments, lengthy development timelines, and the uncertainty of integration and scalability across our entire service territory.
Other technology risks include the need for significant upfront financial investments, lengthy development timelines, and the uncertainty of integration and scalability across our entire service territory.
None of these attempts has individually or in the aggregate resulted in a security incident with a material impact on our financial condition or results of operations.
We periodically engage with our vendors, suppliers and contractors to establish that they are taking appropriate measures. None of these attempts has individually or in the aggregate resulted in a security incident with a material impact on our financial condition or results of operations.
Federally mandated purchases of power from QFs, and integration of power generated from those projects in our system, may increase costs to our customers and decrease system reliability, limit our ability to make generation investments and adversely affect our business.
If a serious reliability or safety incident did occur, it could have a material effect on our results of operations, financial condition or cash flows. 27 Federally mandated purchases of power from QFs, and integration of power generated from those projects in our system, may increase costs to our customers and decrease system reliability, limit our ability to make generation investments and adversely affect our business.
Substantially all operations are conducted by NW Corp (and its subsidiaries) and NWE Public Service. We depend on earnings, cash flows and dividends from our subsidiaries to pay dividends on our common stock.
We have a holding company structure and rely on cash from our subsidiaries to pay dividends. As a holding company, our primary assets are our investments in our subsidiaries, NW Corp and NWE Public Service. Substantially all operations are conducted by NW Corp (and its subsidiaries) and NWE Public Service.
We access long-term capital markets to finance capital expenditures, repay maturing long-term debt and obtain additional working capital from time-to-time. For example, we have $100 million of 1% Montana secured debt maturing in 2024. Our ability to access capital on reasonable terms is subject to numerous factors and market conditions, many of which are beyond our control.
Our ability to access capital on reasonable terms is subject to numerous factors and market conditions, many of which are beyond our control. If we are unable to obtain capital on reasonable terms, it may limit or prohibit our ability to finance capital expenditures and repay maturing long-term debt.
The levels of wholesale sales depend on the wholesale market price, market participants, transmission availability, the availability of generation, and the ongoing development of the Western Energy Imbalance Market (EIM), among other factors. Declines in wholesale market price, availability of generation, transmission constraints in the wholesale markets, or low wholesale demand could reduce wholesale sales.
Declines in wholesale market price, availability of generation, transmission constraints in the wholesale markets, or low wholesale demand could reduce wholesale sales.
Cyber crime, which includes the use of malware, phishing attempts, computer viruses, and other means for disruption or unauthorized access has increased in frequency, scope, and potential impact in recent years. The advancement of artificial intelligence and large language models has given rise to additional vulnerabilities and potential entry points for cyber crime.
Our generation, transmission and distribution facilities are deemed critical infrastructure and provide the framework for our service infrastructure. Cyber crime, which includes the use of malware, phishing attempts, computer viruses, and other means for disruption or unauthorized access has increased in frequency, scope, and potential impact in recent years.
Any such workforce implications and / or limitations or closures impact our ability to achieve our capital investment program and could have a material adverse impact on our ability to serve our customers and on our business, financial condition and results of operations. 33 Liquidity and Financial Risks We may be unable to obtain insurance coverage, and the coverage we currently have may not apply or may be insufficient to cover a significant loss.
Future negotiation of these collective bargaining agreements could lead to work stoppages or other disruptions to our operations, which could adversely affect our financial condition and results of operations. 33 Liquidity and Financial Risks We may be unable to obtain insurance coverage, and the coverage we currently have may not apply or may be insufficient to cover a significant loss.
Any such changes, as well as any enforcement actions or judicial decisions regarding those laws and regulations, could result in significant additional compliance costs that would affect our future financial position, results of operations and cash flows if such costs are not recovered through regulated rates.
If these promulgated GHG and 26 MATS Rules are implemented and enforced as currently written, they may affect our ability to reliably serve our customers and we could be subject to significant additional compliance costs that would affect our future financial position, results of operations, and cash flows if such costs are not recovered through regulated rates.
We rely upon a combination of base-load supply from our owned generation and market purchases to serve customers. The accredited capacity of our Montana portfolio of owned and long-term contracted electric generation resources covers 75 percent of our recent peak electric requirements, with remaining needs, including additional reserve margin, served through market purchases.
We rely upon a combination of base-load supply from our owned and long-term contracted generation and market purchases to serve customers. During peak periods, power demand could exceed, and has exceeded, the available capacity of our owned and long-term contracted generation capacity, requiring us to purchase capacity and energy from the market.
For example, the EPA has indicated that it is currently "evaluating additional opportunities" to reduce GHG emissions from existing power plants. 34 As we expand our energy generation asset mix, the ability to integrate renewable technologies into our operations and maintain reliability and affordability is a risk.
As we expand our energy generation asset mix, the ability to integrate renewable technologies into our operations and maintain reliability and affordability is a risk. The intermittency of renewables remains a critical challenge particularly as cost-efficient energy storage is still in development.
Talen and Puget Sound Energy (Puget), a co-owner of Colstrip, have entered into a transaction in which Puget will transfer its 25% project share in Units 3 and 4 to Talen. The anticipated closing date of the transaction is December 31, 2025.
On July 30, 2024, we entered into an agreement with Puget Sound Energy pursuant to which it will transfer to us its 25% project share in Units 3 and 4 on December 31, 2025. Increased risks of regulatory penalties could negatively impact our business.
With the continuing rise in ransomware and other cyber-based threats we have been analyzing our technology platforms and monitoring for signs of potential intrusions. We have also been reaching out to our vendors, suppliers and contractors requesting that they take appropriate measures.
With the continuing rise in ransomware and other cyber-based threats we continuously analyze our technology platforms and monitoring for signs of potential intrusions. There is also a risk of exposure of confidential or proprietary data through the inadvertent use of open artificial intelligence tools.
In the past, Montana had been a net exporter of electric generation and we have relied upon Montana's excess generation for grid reliability and to physically serve customers. However, that situation in Montana has changed and we are predominantly a net importer, especially during peak demand.
In the past, we have relied upon both in-state and out-of-state power purchase agreements for grid reliability and to physically serve customers.
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No rules are currently in effect that require us to reduce our GHG emissions.
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Recently promulgated federal rules under the Biden Administration will potentially impose requirements on fossil fuel assets, but the Trump Administration is evaluating energy-related regulations impacting reliability and affordability. It is currently unclear whether the promulgated GHG or MATS Rules will be enforced, revised, or repealed.
Removed
However, laws and regulations to which we must adhere change, and the Biden Administration’s agenda includes a significant shift in environmental and energy policy, focusing on reducing GHG emissions and addressing climate change issues. 26 Together, these actions reflect climate change issues and GHG emissions as central areas of focus for domestic and international regulations, orders and policies.
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Extreme weather conditions, especially those of prolonged duration, create high energy demand on our own and/or other systems and increase the risk we may be unable to reliably serve customers, causing brownouts and/or blackouts of our electric 30 systems, and loss of gas supply.
Removed
In addition, a parallel focus on reducing GHG emissions is reflected in legislation introduced in Congress. These initiatives could lead to new and revised energy and environmental laws and regulations, including tax reforms relating to energy and environmental issues.
Added
Demand for our Montana transmission capacity fluctuates with regional demand, fuel prices and weather related conditions. The levels of wholesale sales depend on the wholesale market price, market participants, transmission availability, the availability of generation, and the ongoing development of the Western EIM, among other factors.
Removed
Although previous attempts by the EPA to regulate GHG emissions from coal-fired plants have not succeeded, if GHG and/or methane regulations are implemented, compliance with carbon dioxide (CO 2) emission performance standards, and with other future environmental rules, may make it economically impractical to continue operating all or a portion of our jointly owned facilities or for individual owners to participate in their proportionate ownership of the coal-fired generating units.
Added
We access long-term capital markets to finance capital expenditures, repay maturing long-term debt and obtain additional working capital from time-to-time. For example, we have $300 million of secured long-term debt and $100 million of short-term borrowings maturing in 2025.
Removed
This could lead to significant impacts to customer rates for recovery of plant improvements and / or closure related costs and costs to procure replacement power. In addition, these changes could impact system reliability due to changes in generation sources.
Added
For example, during the Biden Administration, the EPA indicated that it was "evaluating additional opportunities" to reduce GHG emissions from existing power plants.
Removed
The closure by third parties of Billings area generation (Corette) and Colstrip Units 1 and 2 reducing supply, together with increased customer load and the lack of dispatchable replacement generation in eastern Montana, has accelerated concerns about potential difficulties in physically serving parts of Montana including the Billings area.
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Although the Trump Administration has directed federal executive agencies to 34 review all energy related regulations implicating reliability and affordability, it is not yet clear what the impact will be on existing regulations or future legislation or regulations affecting GHG.
Removed
We are executing on multi-year plans for upgrades to the Billings area substations and other delivery infrastructure, but the addition of dispatchable generation in the area is also critical to reliable service in eastern Montana. 27 Increased risks of regulatory penalties could negatively impact our business.
Added
We depend on earnings, cash flows and dividends from our subsidiaries to pay dividends on our common stock.
Removed
If a serious reliability or safety incident did occur, it could have a material effect on our results of operations, financial condition or cash flows.
Removed
These events could adversely affect our results of operations, financial position and cash flows.
Removed
Future negotiation of these collective bargaining agreements could lead to work stoppages or other disruptions to our operations, which could adversely affect our financial condition and results of operations. A pandemic or similar widespread public health concern could have a material negative impact on our business, financial condition and results of operations.
Removed
The actual or perceived effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern, such as COVID-19, will likely negatively affect our business, financial condition and results of operations. The COVID-19 pandemic has had widespread impacts on people, economies, businesses and financial markets.
Removed
While the COVID-19 pandemic did not cause material disruptions to our operations, we could experience such disruptions in the future as a result of a pandemic (or a similar widespread public health concern) due to, among other things, quarantines, increased cyber risk due to employees working from home, worker absenteeism as a result of illness or other factors, social distancing measures and other travel, health-related, business or other restrictions.
Removed
If a significant percentage of our workforce is unable to work, including because of illness, travel restrictions, or government mandates in connection with pandemics or disease outbreaks, our operations may be negatively affected.
Removed
We are subject to financial risks associated with the transition to a lower carbon economy. The risks related to our transition to a lower-carbon economy, creates financial risk. Transition risks represent those risks related to the social and economic changes needed to shift toward a lower carbon future.
Removed
NorthWestern Energy Group is a holding company and relies on cash from its subsidiaries to pay dividends. Through completion of a reorganization on January 1, 2024, NorthWestern Energy Group is a holding company parent entity and thus its primary assets are its subsidiaries, NW Corp and NWE Public Service.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeBoth the Audit Committee and the SETO Committee include Directors with diverse experience in technology, finance, enterprise risk, and security providing effective assessment and oversight of cybersecurity risk. Of note, one member of the Board has bolstered their understanding of technology and security issues by obtaining a certificate in cybersecurity oversight.
Biggest changeThe Safety, Environmental, Technology and Operations (SETO) Committee provides oversight and review of technology policy and strategy as it relates to cybersecurity issues impacting company operations. Both the Audit Committee and the SETO Committee include Directors with diverse experience in technology, finance, enterprise risk, and security providing effective assessment and oversight of cybersecurity risk.
An Incident Response and Disaster Recovery Plan is maintained and periodically exercised. The plan includes a process to identify, protect, detect, respond to and recover from cybersecurity threats and incidents. Resiliency and recoverability are paramount in the plan.
An Incident Response and Disaster Recovery Plan is maintained and exercised. The plan includes a process to identify, protect, detect, respond to and recover from cybersecurity threats and incidents. Resiliency and recoverability are paramount in the plan.
Our strategy includes employee training and awareness on cybersecurity risks and related best practices, required password complexity, the use of multi-factor authentication, information security protocols, modern end point protection against threats, patching strategy, the execution of tabletop exercises on a periodic basis, established policies and protocols for cyber incident response planning and reporting, and ongoing internal cybersecurity testing.
Our strategy includes employee training and awareness on cybersecurity risks and related best practices, simulated phishing campaigns, required password complexity, the use of multi-factor authentication, information security protocols, modern end point protection against threats, patching strategy, the execution of tabletop exercises on a periodic basis, established policies and protocols for cyber incident response planning and reporting, and ongoing internal cybersecurity testing.
Collectively, our cyber security team has experience in cybersecurity, hold numerous industry certifications related to cybersecurity, and have experience in desktop support, networking, application administration and programming. 37
Collectively, our cyber security team holds numerous industry certifications related to cybersecurity and have experience in desktop support, networking, application administration and programming. 37
For the year ended December 31, 2023, there have been no cybersecurity incidents with a material impact on our business strategy, operations, or financial condition. Risk Management and Strategy We utilize a comprehensive, defense in depth approach to cybersecurity risk, which helps us to continually assess, identify and manage enterprise-wide material cybersecurity risks.
Through the year ending on December 31, 2024, there have been no cybersecurity incidents that have had a material impact, or any impact, on our business strategy, operations, or financial condition. Risk Management and Strategy We utilize a comprehensive, defense in depth approach to cybersecurity risk, which helps us to continually assess, identify and manage enterprise-wide material cybersecurity risks.
Roles and Responsibilities of Management Our cyber security team, which reports to the Vice President - Technology, has primary responsibility for cybersecurity strategy and assessing cyber risk.
Of note, one member of the Board has bolstered their understanding of technology and security issues by obtaining a certificate in cybersecurity oversight. Roles and Responsibilities of Management Our cyber security team, which reports to the Vice President - Technology, has primary responsibility for cybersecurity strategy and assessing cyber risk.
Service providers and vendors must adhere to security requirements such as security incident or data breach notification and response protocols, appropriate data encryption requirements, and data disposal. In addition, we engage with third party consultants to perform penetration (PEN) studies. These independent third party assessments provide valuable insight to enhance our cybersecurity posture.
Service providers and vendors must adhere to security requirements such as security incident or data breach notification and response protocols, appropriate data encryption requirements, and data disposal. Our cyber incident monitoring process includes dialog with any third party or business partner potentially impacted by a disclosed incident. In addition, we leverage third party consultants to perform penetration (PEN) studies.
Any significant interruption or failure of our information systems due to cyber-attacks, hacking or internal security breaches could prevent us from fulfilling our critical business functions including delivering energy to our customers, and sensitive, confidential, and other data could be compromised. This could adversely affect our business, our financial condition, operating results or liquidity.
Any significant interruption or failure of our information systems due to cyber-attacks or incidents could hinder our ability to fulfill our critical business functions. This could adversely affect our business, our financial condition, operating results or liquidity.
Board Governance Our Board of Directors reviews the cybersecurity program through risk review and cybersecurity reporting on at least a quarterly basis. The Audit Committee oversees our ERM program, including cybersecurity protocols. The Safety, Environmental, Technology and Operations (SETO) Committee provides oversight and review of technology policy and strategy as it relates to cybersecurity issues impacting company operations.
These independent third party assessments provide valuable insight to enhance our cybersecurity posture. Board Governance Our Board of Directors reviews the cybersecurity program through risk review and cybersecurity reporting on at least a quarterly basis. The Audit Committee oversees our ERM program, including cybersecurity protocols.
Removed
We monitor potential risks associated with the use of third-party service providers and vendors. Our cyber incident monitoring process includes dialog with any third party or business partner potentially impacted by a disclosed incident.
Added
As part of engaging a new third party provider, we assess their security standards, require security terms and conditions and work with risk management to ensure insurance coverage is adequate for the exposure risk.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock, which is traded under the ticker symbol NWE, is listed on the Nasdaq Stock Market. As of February 9, 2024, there were approximately 1,209 common stockholders of record.
Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock, which is traded under the ticker symbol NWE, is listed on the Nasdaq Stock Market. As of February 7, 2025, there were approximately 1,201 common stockholders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe are committed to working with our customers and communities to help them achieve their sustainability goals and add new technology on our system. 41 HOW WE PERFORMED IN 2023 COMPARED TO OUR 2022 RESULTS Year Ended December 31, 2023 vs. 2022 Income Before Income Taxes Income Tax Benefit (Expense) Net Income (in millions) Year ended December 31, 2022 $ 182.4 $ 0.6 $ 183.0 Variance in revenue and fuel, purchased supply, and direct transmission expense (1) items impacting net income: Montana rate review - new base rates 32.6 (8.3) 24.3 Lower non-recoverable Montana electric supply costs 14.2 (3.6) 10.6 Montana property tax tracker collections 12.8 (3.2) 9.6 Higher Montana natural gas transportation 2.2 (0.6) 1.6 Higher electric transmission revenue 0.6 (0.2) 0.4 Lower natural gas retail volumes (7.0) 1.8 (5.2) Lower electric retail volumes (1.8) 0.5 (1.3) Higher revenue from lower production tax credits, offset within income tax benefit (expense) 3.8 (3.8) — Other (1.7) 0.4 (1.3) Variance in expense items (2) impacting net income: Higher depreciation expense (15.5) 3.9 (11.6) Higher interest expense (14.5) 3.7 (10.8) Higher operating, maintenance, and administrative expenses (14.4) 3.6 (10.8) Lower property and other taxes not recoverable within trackers 3.0 (0.8) 2.2 Other 4.9 (1.5) 3.4 Year ended December 31, 2023 $ 201.6 $ (7.5) $ 194.1 Change in Net Income $ 11.1 (1) Exclusive of depreciation and depletion shown separately below (2) Excluding fuel, purchased supply, and direct transmission expense Consolidated net income in 2023 was $194.1 million as compared with $183.0 million in 2022.
Biggest changeWe are committed to working with our customers and communities to help them achieve their sustainability goals and add new technology on our system. 41 HOW WE PERFORMED IN 2024 COMPARED TO OUR 2023 RESULTS Year Ended December 31, 2024 vs. 2023 Income Before Income Taxes Income Tax Benefit (Expense) Net Income (in millions) December 31, 2023 $ 201.6 $ (7.5) $ 194.1 Variance in revenue and fuel, purchased supply, and direct transmission expense (1) items impacting net income: Base rates 62.4 (15.8) 46.6 Electric transmission revenue 18.6 (4.7) 13.9 Montana interim rates (subject to refund) 4.8 (1.2) 3.6 Montana natural gas transportation 2.3 (0.6) 1.7 Montana property tax tracker collections 1.1 (0.3) 0.8 Production tax credits, offset within income tax benefit (expense) 0.2 (0.2) — Non-recoverable Montana electric supply costs (7.9) 2.0 (5.9) QF liability adjustment (4.2) 1.1 (3.1) Natural gas retail volumes (4.0) 1.0 (3.0) Electric retail volumes (0.9) 0.2 (0.7) Other (3.2) 0.8 (2.4) Variance in expense items (2) impacting net income: Operating, maintenance, and administrative (19.4) 4.9 (14.5) Depreciation (17.1) 4.3 (12.8) Interest expense (17.1) 4.3 (12.8) Property and other taxes not recoverable within trackers (4.4) 1.1 (3.3) Release of unrecognized tax benefits (inclusive of related interest previously accrued) — 17.8 17.8 Gas repairs safe harbor method change — 7.0 7.0 Other 1.9 (4.8) (2.9) December 31, 2024 $ 214.7 $ 9.4 $ 224.1 Change in Net Income $ 30.0 (1) Exclusive of depreciation and depletion shown separately below.
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.
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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following includes a discussion of our results of operations and cash flows for the year ended December 31, 2023 compared to the year ended December 31, 2022, on both a consolidated basis and on a segment basis.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following includes a discussion of our results of operations and cash flows for the year ended December 31, 2024 compared to the year ended December 31, 2023, on both a consolidated basis and on a segment basis.
For a discussion of our financial results and cash flows for the year ended December 31, 2022 compared with the year ended December 31, 2021, see Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022 .
For a discussion of our financial results and cash flows for the year ended December 31, 2023 compared with the year ended December 31, 2022, see Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 .
Our Utility Margin measure may not be comparable to that of other companies' presentations or more useful than the GAAP information provided elsewhere in this report. OVERVIEW 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 Utility Margin measure may not be comparable to that of other companies' presentations or more useful than the GAAP information provided elsewhere in this report. OVERVIEW 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.
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.
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.
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.
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.
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.
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.
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.
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.
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, higher interest expense, higher operating, maintenance, and administrative expenses, and higher income tax expense. 42 SIGNIFICANT TRENDS AND REGULATION Regulatory Update Rate reviews are necessary to recover the cost of providing safe, reliable service, while contributing to earnings growth and achieving our financial objectives.
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, administrative and general costs, and interest expense. 42 SIGNIFICANT TRENDS AND REGULATION Regulatory Update Rate reviews are necessary to recover the cost of providing safe, reliable service, while contributing to earnings growth and achieving our financial objectives.
We anticipate filing the next resource plan in the summer of 2024. 45 SIGNIFICANT INFRASTRUCTURE INVESTMENTS AND INITIATIVES Our estimated capital expenditures for the next five years, including our electric and natural gas transmission and distribution and electric generation infrastructure investment plan, are as follows (in millions): Electric Supply Resource Plans - Our energy resource plans identify portfolio resource requirements including potential investments.
Our strategic acquisition of additional interest in Colstrip Units 3 & 4 beginning in 2026, the construction of the YCGS, and our balanced energy portfolio have enabled us to serve new large energy supply customers while continuing to provide our current customers with affordable and reliable energy. 44 SIGNIFICANT INFRASTRUCTURE INVESTMENTS AND INITIATIVES Our estimated capital expenditures for the next five years, including our electric and natural gas transmission and distribution and electric generation infrastructure investment plan, are as follows (in millions): Electric Supply Resource Plans - Our energy resource plans identify portfolio resource requirements including potential investments.
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.
See Note 1 8 - Commitments and Contingencies to the Consolidated Financial Statements included herein for additional information regarding legal challenges impacting YCGS.
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.
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. 43 EPA Rules In April 2024, the EPA released GHG Rules for existing coal-fired facilities and new coal and natural gas-fired facilities as well as MATS Rules.
We regularly review the need for electric and natural gas rate relief in each state in which we provide service. Montana Rate Review Filing – On October 27, 2023, the MPSC issued a final order approving the settlement agreement filed April 3, 2023. Final rates, adjusting from interim to settled rates, were effective November 1, 2023.
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: Montana Rate Review - In July 2024, we filed a Montana electric and natural gas rate review (2023 test year) with the MPSC.
For additional information related to our Montana Rate Review Filing, see Note 3 - Regulatory Matters to the Consolidated Financial Statements. 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.
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.
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.
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.
Electric Resource Planning - Montana 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.
Electric Resource Planning - Montana 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.
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.
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.
Removed
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.
Added
(2) Excluding fuel, purchased supply, and direct transmission expense. Consolidated net income in 2024 was $224.1 million as compared with $194.1 million in 2023.
Removed
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.
Added
This increase was primarily due to new base rates in Montana and South Dakota, electric transmission revenue, and income tax benefits from a change to the gas repairs safe harbor method and a reduction to our unrecognized tax benefits.
Removed
Holding Company Reorganization – On October 2, 2023, NW Corp and NorthWestern Energy Group completed a merger transaction pursuant to which NorthWestern Energy Group became the holding company parent of NW Corp.
Added
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.
Removed
In this reorganization, shareholders of NW Corp (the predecessor publicly held parent company) became shareholders of NorthWestern Energy Group, maintaining the same number of shares and ownership percentage as held in NW Corp immediately prior to the reorganization. NW Corp became a wholly-owned subsidiary of NorthWestern Energy Group.
Added
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.
Removed
The transaction was effected pursuant to a merger pursuant to Section 251(g) of the General Corporation Law of the State of Delaware, which provides for the formation of a holding company without a vote of the shareholders of the constituent corporation.
Added
In November 2024, the MPSC partially approved our requested interim rates, which are subject to refund, increasing electric and natural gas base rates by $18.4 million and $17.4 million, respectively, and decreasing our PCCAM base costs by $88.0 million, effective December 1, 2024. In January 2025, intervenor testimony was filed and we anticipate filing our rebuttal testimony in March 2025.
Removed
Immediately after consummation of the reorganization, NorthWestern Energy Group had, on a consolidated basis, the same assets, businesses and operations as NW Corp had immediately prior to the consummation of the reorganization.
Added
Based on the procedural schedule developed by the MPSC, a hearing on our rate review request is scheduled to commence on April 22, 2025.
Removed
As a result of the reorganization, NorthWestern Energy Group became the successor issuer to NW Corp pursuant to Rule 12g-3(a) of the Securities Exchange Act of 1934, and as a result, NorthWestern Energy Group's common stock was deemed registered under Section 12(b) of the Securities Exchange Act of 1934.
Added
If a final order is not received by May 23, 2025, which is 270 days from acceptance of our filing, we intend to implement our requested rates as permitted by the MPSC regulations, which will be subject to refund until a final order is received.
Removed
On January 1, 2024, we completed the second and final phase of the holding company reorganization.
Added
Nebraska Natural Gas Rate Review - In June 2024, we filed a natural gas rate review (2023 test year) 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.
Removed
NW Corp contributed the assets and liabilities of its South Dakota and Nebraska regulated utilities to NWE Public Service, and then distributed its equity interest in NWE Public Service and certain other subsidiaries to NorthWestern Energy Group, resulting in NW Corp owning and operating the Montana regulated utility and NWE Public Service owning and operating the Nebraska and South Dakota utilities, each as a direct subsidiary of NorthWestern Energy Group.
Added
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.
Removed
Power Costs and Credits Adjustment Mechanism - The MPSC's September 2022 decision approving interim rates related to our Montana rate review included a $61.1 million increase to the PCCAM Base, from $138.7 million to $199.8 million, effective October 1, 2022.
Added
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.
Removed
The MPSC's October 2023 decision approving the Montana rate review settlement agreement increased the PCCAM Base to $208.4 million, with retroactive application to July 1, 2022.
Added
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.
Removed
We have under-collected our total Montana electric supply costs for the July 2022 through June 2023 PCCAM year by approximately $14.5 million, which includes a $2.9 million increase to our under-collection for this tracker period to reflect the retroactive application of the higher PCCAM Base rates effective July 1, 2022.
Added
However, the Trump Administration is evaluating energy related regulations impacting reliability and affordability. See Note 1 8 - Commitments and Contingencies to the Consolidated Financial Statements included herein for additional information regarding these rules.
Removed
As of December 31, 2023, we have over-collected our total Montana electric supply costs for the July 2023 through June 2024 PCCAM year by approximately $4.7 million. 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.
Added
Acquisition of Energy West Montana Assets In July 2024, we entered into an Asset Purchase Agreement with Hope Utilities to acquire its Energy West natural gas utility distribution system and operations serving approximately 33,000 customers located near Great Falls, Cut Bank, and West Yellowstone, Montana for approximately $39.0 million, subject to certain working capital and other agreed upon closing adjustments.
Removed
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.
Added
The transaction is subject to a number of customary closing conditions, including MPSC approval, and we expect the acquisition to be completed in the first half of 2025. Regional Transmission Development Activities 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 NPC Consortium project.
Removed
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.
Added
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.
Removed
As discussed above, the approved Montana rate review settlement provides for an update to the PCCAM by adjusting the base costs from $138.7 million to $208.4 million and providing for more timely quarterly recovery of deferred balances instead of annual recovery.
Added
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.
Removed
The updated $208.4 million PCCAM Base is retroactive to an effective date of July 1, 2022. 43 Our electric supply from owned and long-term contracted resources is not adequate to meet our peak-demand needs.
Added
We collaborated with Grid United, the Montana Department of Commerce, and other regional utilities on the successful GRIP grant application.
Removed
Because of this, the volatility of market prices for energy on peak-demand days, even if only for a few days in duration, exposes us to potentially significant market purchases that could negatively impact our results of operations and cash flows. See the Electric Resource Planning - Montana section below for how we are working to address this market exposure.
Added
In addition to the Colstrip Transmission System Upgrade, in December 2024, we signed a nonbinding memorandum of understanding (MOU) with North Plains Connector LLC, a wholly owned subsidiary of Grid United, to own 10 percent (300 megawatts) of the NPC Consortium project. The project is entering the permitting phase and initiating regulatory filings with approvals targeted in 2026.
Removed
The Avista Agreement contains customary representations and warranties, covenants, and indemnification obligations, and the Avista Agreement is subject to customary conditions and approvals, including approval from the FERC. Closing also is conditioned on our ability to enter into a new coal supply agreement for Colstrip by December 31, 2024.
Added
Construction is expected to commence in 2028, with the project expected to be operational by 2032. Under the terms of the MOU, Grid United will continue to fund the development of the NPC and we will invest when the regulatory approvals and permits are in place.
Removed
Such coal supply agreement must provide a sufficient amount of coal to Colstrip to permit the generation of electric power by the maximum permitted capacity of the interest in Colstrip then held by us during the period from January 1, 2026 through, December 31, 2030.
Added
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.
Removed
Either party may terminate the Avista Agreement if any requested regulatory approval is denied or if the closing has not occurred by December 31, 2025 or if any law or order would delay or impair closing.
Added
President Trump issued an Executive Order on January 20, 2025, "Unleashing American Energy," directing all federal executive agency heads to review all agency actions implicating energy reliability and affordability or potentially burdening the development of domestic energy resources. This Executive Order has delayed, for up to 90 days, the disbursement of the funds granted by the U.S.
Removed
Future Integrated Resource Planning - Resource adequacy in the Western third of the U.S. has been declining with the retirement of thermal power plants. Our owned and long-term contracted resources are inadequate to supply the necessary capacity we require to meet our peak-demand loads, which exposes us to large quantities of market purchases at typically high and volatile energy prices.
Added
Department of Energy for the NPC Consortium project. We have also entered into a nonbinding letter of intent with Grid United to continue transmission development to further enhance the grid through the southwest corridor of Montana.
Removed
To comply with regulatory resource planning requirements, we submitted an IRP to the MPSC on April 28, 2023. We remain concerned regarding an overall lack of capacity in the West and our owned and long-term contracted capacity deficit to meet peak-demand loads.
Added
Development to expand the southwest corridor of Montana through grid build out would represent a significant step in enhancing connectivity between Montana and the broader Western energy market - bolstering grid reliability, allowing for critical import capability, and enabling customers to access and benefit from emerging energy markets in the West.
Removed
The construction of the Yellowstone County Generating Station and acquisition of Avista's Colstrip Units 3 and 4 interests are expected to reduce our exposure to market purchases. Proposed EPA Rules In May 2023, the EPA proposed new GHG emissions standards for coal and natural gas-fired plants.
Added
Montana Data Centers In December 2024, we announced two separate nonbinding letters of intent to provide electric supply services for data centers being developed in Montana. The combined energy service requirement is expected to be 75 megawatts beginning in early 2026 with growth of up to 400 megawatts or more by 2030.
Removed
In particular, the proposed rules would (i) strengthen the current New Source Performance Standards for newly built fossil fuel-fired stationary combustion turbines (generally natural gas-fired); (ii) establish emission guidelines for states to follow in limiting carbon pollution from existing fossil fuel-fired steam generating electric generating units (including coal, oil and natural gas-fired units); and (iii) establish emission guidelines for large, frequently used existing fossil fuel-fired stationary combustion turbines (generally natural gas-fired).
Removed
In addition, in April 2023, EPA proposed to amend the MATS. Among other things, MATS currently sets stringent emission limits for acid gases, mercury, and other hazardous air pollutants from new and existing electric generating units. We are in compliance with existing MATS requirements.
Removed
The proposed amendment of the MATS would strengthen the MATS requirements, and if adopted as written, both the GHG and MATS proposed rules could have a material negative impact on our coal-fired plants, including requiring potentially expensive upgrades or the early retirement of Colstrip Unit's 3 and 4 due to the rules making the facility uneconomic. 44 Previous efforts by the EPA were met with extensive litigation and we anticipate a similar response if the proposed rules are adopted.
Removed
As MATS and GHG regulations are implemented, it could result in additional material compliance costs. We will continue working with federal and state regulatory authorities, other utilities, and stakeholders to seek relief from any MATS or GHG regulations that, in our view, disproportionately impact customers in our region.
Removed
Electric Resource Supply - South Dakota Our electric supply resource plans for South Dakota continue to identify portfolio requirements including potential investments resulting from a completed competitive solicitation process.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed11 unchanged
Biggest changeAs of December 31, 2023, we had $318.0 million in borrowings under our revolving credit facilities. A 1.0 percent increase in interest rates would increase our annual interest expense by approximately $3.2 million.
Biggest changeAs of December 31, 2024, we had $413.0 million in borrowings under our revolving credit facilities. A 1.0 percent increase in interest rates would increase our annual interest expense by approximately $4.1 million.

Other NWE 10-K year-over-year comparisons