CenterPoint and Xcel each request gas rate hikes of over 6%, but also offer alternatives

Published November 10, 2021

As they say: when it rains, it pours. On top of already high natural gas prices — and in addition to rate hike filings by Minnesota Power and Xcel’s electricity business — the state’s two largest natural gas utilities have also requested to increase their base rates of providing service. 

In separate filings on November 1, Xcel and CenterPoint each asked state regulators to approve increases of about 6.5% to their base revenues. Any change to base rates requires the approval of the Minnesota Public Utilities Commission (PUC) in a proceeding called a general rate case. While the PUC is considering the requests, the utilities would each add interim hikes of about 5% to the rates that customers pay. (Minnesota law allows utilities to charge interim rates while proposed rate increases are pending PUC final approval; if final rates are lower than the interim rates, customers receive refunds with interest.)

Recognizing current high gas costs and an unusually busy schedule at the PUC, Xcel and CenterPoint have each also offered unique “stay-out” proposals: potential compromises that each utility would agree to in exchange for withdrawing its request for a time- and resource-intensive rate case. As discussed in more detail below, Xcel is essentially offering to put off their general rate hike for at least a year. CenterPoint is asking for expedited approval of a smaller rate increase.

Regardless of the outcome of these rate cases and associated stay-out proposals, customers can expect their natural gas bills to increase this winter. Neither general rate increase request accounts for the cost of gas, which has increased dramatically this year; the U.S. Energy Information Administration projects that Midwest natural gas prices will be 45% higher this year. Customers are also now paying extra to cover the natural gas price spike from February of this year (a rate increase CUB is fighting in a separate proceeding). CenterPoint’s stay-out proposal would reduce these extra charges and lengthen the time over which they’re recovered (more detail below); Xcel would leave them unchanged. 

Xcel’s gas rate increase request

In its general rate case filing, Xcel is requesting an annual base rate increase of $35.6 million (a 6.6% increase in total revenues, with a higher 8.6% increase for residential customers). Beginning January 1, 2022 Xcel would have an interim increase of 4.9%. 

Alternatively, as its stay-out proposal, Xcel has offered to withdraw its rate increase request if it’s given permission to track expenses related to depreciation, property taxes, and the operation and maintenance of gas distribution systems. Xcel requests to recover these costs from customers retroactively at a later date.

CUB is supporting the stay-out proposal. We are generally hesitant about allowing utilities to defer costs for future recovery, but we believe it’s in the public interest in this case. Allowing dollar-for-dollar recovery of costs can undermine utilities’ incentives to spend customers’ money prudently, and it can subtly shift the burden of proving that spending was prudent from utility companies onto advocates like us. 

However, Xcel’s stay-out proposal would allow base rates to remain unchanged in 2022, and we believe the deferral is best for customers under the current unique circumstances. Even before the high gas commodity prices and natural gas price spike charges reached customers this fall, more than 13% of Xcel’s residential customers were already behind on their bills. In addition, many Xcel gas customers will see rising electricity costs, with the proposed electricity rate increases mentioned earlier. Finally, consumers are facing rising costs for housing, food, and many other areas of the family budget. Xcel would still bear the burden of proving that their deferred expenses were incurred prudently before they’re allowed to charge them to customers.

CenterPoint’s gas rate increase request

In its general rate case filing, CenterPoint is requesting an annual base rate increase of $67.1 million, a 6.5% increase in revenues. Beginning January 1, 2022 CenterPoint would have an interim increase of 5.1%.

CenterPoint has also proposed a stay-out, offering to withdraw its request in exchange for a smaller increase that would be effective next year. In its stay-out, Centerpoint seeks approval to increase rates by about $40 million (3.9%). This increase would cover capital investments that aren’t yet included in the company’s rates (and a return for CenterPoint shareholders). As mentioned, CenterPoint would also reduce the monthly charges for February’s price spike and extend recovery over about five years (versus the roughly two year timeframe over which costs are currently scheduled to be recovered).   

With the complex issues presented and a very short timeline for review, CUB has not taken a position on CenterPoint’s stay-out. 

Next steps

We expect the PUC will issue decisions on the Xcel and CenterPoint stay-out requests — and set interim rates for January, if either stay-out is denied and the general rate case goes forward — in December. You can comment on the stay-outs now, and there will be opportunities for comment on the general rate cases if they go forward. We will keep you up to date as the cases progress.

In the meantime, if you are concerned about your bill, here are some resources to help.

If you have questions, concerns, or would just like to talk with someone to see if there are ways to reduce how much you spend on energy costs, contact us: 651-300-4701 or info@cubminnesota.org.

How useful was this post?

We are sorry that this post was not useful for you!

Let us improve this post!

Tell us how we can improve this post?

Author: Annie Levenson-Falk

Leave a Reply