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Centerpoint Energy earnings report reveals $1.3 billion gain from deal with Texas company that benefited from 2021 gas price spike

Published June 1, 2022

Earlier this year, CUB released a white paper outlining concerns we had about a merger involving CenterPoint Energy, Inc. (the Texas-based parent company of Minnesota’s largest natural gas utility) and another Texas-based gas company, Energy Transfer. CenterPoint’s earnings reports have now revealed that, as a result of the merger, CenterPoint Energy, Inc. gained approximately $1.3 billion, net of tax. We have updated our white paper (pdf) examining this merger and what it means for CenterPoint’s customers in Minnesota.

When Winter Storm Uri caused gas prices to skyrocket by as much as 500% over average prices in February 2021, we knew that someone was profiting. Energy Transfer was among the storm’s biggest profiteers, making more than $2.4 billion during the brief price spike. Energy Transfer remains subject to a price gouging lawsuit over this event. During this same storm, CenterPoint incurred around $466 million in extra costs procuring natural gas for its Minnesota service territory, which CenterPoint is now passing through to its Minnesota customers. (CUB is currently fighting those costs before the PUC.)

The merger gave CenterPoint Energy, Inc. a substantial equity interest in Energy Transfer. It appeared to us that CenterPoint Energy, Inc. was profiting from its equity interest in Energy Transfer, just as CenterPoint’s Minnesota gas utility was seeking to raise Minnesotans’ gas bills to pay for costs the utility incurred during the same storm.

To be clear, we are not accusing CenterPoint of engaging in price gouging or other unlawful activity, or otherwise suggesting that CenterPoint intentionally exploited Winter Storm Uri to enrich CenterPoint’s shareholders at the expense of its ratepayers. The merger was completed after the storm, and CenterPoint did not purchase gas from Energy Transfer to supply Minnesota customers during the storm. 

However, this example presents an egregious “tale of two economies”: one economy in which CenterPoint’s shareholders and corporate officers seem to be doing very well and another in which its ratepayers are struggling with higher bills.

CUB has now updated our white paper to include additional information that has come to light, and to include CenterPoint’s responses to questions CUB posed to CenterPoint in the original version.

Since the white paper was published, CenterPoint Energy, Inc. has sold off the remainder of its ownership in Energy Transfer and clarified the total benefits received as a result of the merger. Specifically, its CEO, David Lesar, noted the following in a May 3, 2022 earnings call with shareholders and investors:

“Within four months of the merger between Enable and Energy Transfer, we sold 100% of our common units at a 20% premium to Energy Transfer’s unit price when the transaction was announced last February. Not a bad outcome for those shareholders who thought we would never get out of this investment, let alone receive approximately $1.3B of net after-tax proceeds from it.”

The “20% premium” Mr. Lesar references is thanks, at least in part, to the bump in value Energy Transfer experienced as a result of Winter Storm Uri.  

Meanwhile, CenterPoint has also come under fire recently for compensation Mr. Lesar received in 2021. A recent Energy and Policy Institute report highlighted the fact that Mr. Lesar made a total of $37.8 million in compensation in 2021. For reference, this amount is double or triple the compensation of most other large utilities’ CEOs, 366 times as much as the average CenterPoint employee, and 515 times Minnesota’s 2020 median household income. The report preceded a shareholder meeting where shareholders took the rare action of voting to disapprove of Mr. Lesar’s 2021 compensation.

The tale of two economies persists.

What Can You Do?

If you are frustrated by what you read above – and by the Winter Storm Uri-related surcharges appearing on your natural gas bill – let the PUC know how they are affecting you and your family. The PUC needs to hear from Minnesotans about the impact of these extra charges, and whether it is fair for customers to be on the hook for the full amount. You can file a comment with the PUC using the form below or through one of the other options offered here. Please note that your comment, including your name, email, and any other personal information you include, will be part of the public record. Your address will not be included.

Author: Hannah Hoeger

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