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Is CenterPoint “having its cake and eating it too” when recovering Winter Storm Uri costs from Minnesotans?

March 1, 2022

Published March 1, 2022

A report (pdf) issued by CUB today raises questions about Texas-based CenterPoint Energy’s financial interest in another Texas company that made billions during the February 2021 Winter Storm Uri. The report comes while CenterPoint’s Minnesota-based subsidiary is attempting to pass on approximately $466 million in costs associated with last year's storm to Minnesota consumers. 

CUB’s research found that it appears CenterPoint received over a billion dollars in gross proceeds related to a merger involving a CenterPoint affiliate and Energy Transfer, a Texas energy company which has been accused of price gouging after it made $2.4 billion during the storm. CenterPoint is also in the midst of a general rate increase request. CenterPoint's Minnesota consumers are experiencing significantly higher gas bills this year due to a recent “interim” rate increase, unusually high natural gas prices, cold temperatures, and Winter Storm Uri-related surcharges added to most customers’ bills. Meanwhile, in an earnings call last week, CenterPoint CEO David J. Lesar said, “2021 was a great year for CenterPoint with quarter after quarter of meeting or exceeding expectations,” which raises the question of why CenterPoint needs to add additional costs to already overburdened energy consumers.

Winter Storm Uri caused substantial costs for Minnesota customers, profits for energy companies

One year ago, Winter Storm Uri caused temperatures to plummet across much of the United States. The widespread cold temperatures caused demand for natural gas to increase as households and businesses consumed more gas for heating purposes. Meanwhile, the cold weather also caused "freeze off" events at some natural gas generation and transportation systems – particularly in Texas and other southern states – which reduced the available supply of natural gas. Finally, Winter Storm Uri coincided with the Presidents Day Holiday weekend, when there were limited opportunities for natural gas purchases and sales. These coinciding factors caused natural gas prices to spike to historic levels, and Minnesota utilities incurred hundreds of millions of dollars in extra costs in order to purchase the gas that was supplied to their customers. 

CenterPoint, specifically, calculates that it spent more than $466 million more than normal on gas supplies between February 13 and 17, 2021. To put this into context, CenterPoint’s total annual gas commodity costs for providing gas to Minnesotans during the entire previous gas year were approximately $321 million. CenterPoint is currently recovering these costs through an additional charge that will be on most of its Minnesota customers’ bills for 63 months, subject to the outcome of a regulatory proceeding contesting the prudency of the company’s spending. (CUB is intervening in this proceeding.) Additionally, CenterPoint has requested to increase its base rates in Minnesota by approximately 6.5%. 

Meanwhile, some natural gas suppliers and transporters made enormous profits during the storm. Energy Transfer, LP is among such entities. One of the largest midstream energy companies in North America, Energy Transfer owns and operates approximately 114,000 miles of pipelines. Energy Transfer made $2.4 billion during Winter Storm Uri and posted quarterly net income of $3.29 billion in the first quarter of 2021. At least one Texas utility, CPS Energy, sued Energy Transfer for price gouging during Winter Storm Uri, noting in its lawsuit that gas prices CPS paid to Energy Transfer were 15,000% higher than usual.

Merger with Energy Transfer raises questions for CenterPoint’s Minnesota consumers

On February 17, 2021 – in the midst of Winter Storm Uri – CenterPoint issued a press release announcing a proposed merger between CenterPoint’s affiliate, Enable Midstream Partners, LP, and Energy Transfer. That merger eventually closed in December 2021.

All told, CenterPoint has received approximately $1.3 billion from the merger, mostly through subsequent sales of Energy Transfer equity that occurred in late 2021. CenterPoint has sold about 70% of its interest in Energy Transfer but retains some ownership. 

CenterPoint’s Houston-based President and CEO highlighted these transactions in a recent earnings call with CenterPoint’s shareholders and potential investors. Online trade publication, T&D World, included the following statement in its summary of CenterPoint’s 2021 Fourth Quarter earnings results:

For the fourth quarter, CenterPoint produced a profit of $641 million, more than four times its year-prior number thanks to a big gain related to the recently completed merger of Enable Midstream Partners, in which CenterPoint held a majority stake, with Energy Transfer LP.

Many Minnesotans, of course, have not been experiencing “quarter after quarter” of strong financial health. On the contrary, many Minnesotans are continuing to struggle with the economic fallout of the COVID-19 pandemic, inflation, rising costs of natural gas, and now Winter Storm Uri-related surcharges added to their natural gas bills. We, as consumer advocates, are concerned about the “tale of two economies” present in a scenario where CenterPoint is able to perform very well for its shareholders – thanks, in part, to financial interests it acquired in a gas supplier that made egregious profits during Winter Storm Uri – and also pass hundreds of millions of dollars in Winter Storm Uri-related costs through to its Minnesotan customers, many of whom are currently struggling to pay higher gas bills. 

CUB has written a white paper presenting facts, as we understand them, about the merger involving CenterPoint and Energy Transfer and various transactions that have followed that merger. We intend for the white paper to cast transparency on these transactions, which CenterPoint’s Minnesota customers deserve to know more about. To be clear, our intention is not to accuse CenterPoint of engaging in price gouging or any other unlawful activity. Further, we understand that a deeper financial analysis of the complex details of the merger might reveal more about the impact of the merger on CenterPoint’s financial health. We welcome, and encourage, CenterPoint to provide that analysis and explain it to its customers. 

However, the facts presented in this white paper raise several concerns and questions that we believe warrant further explanation from CenterPoint, including the following:

  • What is the total of proceeds or earnings CenterPoint has received as a result of the merger, its financial interests in Energy Transfer, and/or its subsequent sale or liquidation of Energy Transfer equity interests?
  • What is the estimated amount of proceeds or earnings CenterPoint expects to receive in the future through its financial interest in Energy Transfer?
  • Do CenterPoint’s Minnesota customers benefit from the merger? If so, how?
  • How do revenue and earnings CenterPoint received through the merger, its financial interest in Energy Transfer, and/or subsequent sales of its interest in Energy Transfer affect CenterPoint’s need to recover Winter Storm Uri-related costs from Minnesotans?
  • How do revenue and earnings CenterPoint received through the merger, its equity interest in Energy Transfer, and/or subsequent sales of its interest in Energy Transfer affect CenterPoint’s need to raise Minnesotans’ rates?
  • Does CenterPoint’s financial interest in Energy Transfer create a conflict of interest for CenterPoint to participate in regulatory investigations of price-gouging or market manipulation during Winter Storm Uri (or in subsequent extreme weather events, including the winter storm affecting Texas in February 2022)?
  • Does CenterPoint’s financial interest in Energy Transfer create a conflict of interest for CenterPoint to pursue contract, or other private, claims (if any exist) against Energy Transfer or other entities involved in the sale, storage, or transport of natural gas during Winter Storm Uri?

You can view the complete white paper here. 

Public comment opportunity

If you are a Minnesota customer of CenterPoint (or Xcel gas, Minnesota Energy Resources, or Great Plains Natural Gas), you can make a public comment to state regulators who are deciding how much of the winter storm costs the utilities will ultimately be able to charge back to their customers. 

The Minnesota Public Utilities Commission will be holding public hearings on Winter Storm Uri-related costs on March 3, 2022, at 1:00 p.m. and 6:00 p.m. via video or phone. More information on these hearings is available here. Any member of the public may give verbal comments at the hearing and/or submit written comments.

Comments will become a part of the record before the Commission and will inform the Commission’s decision on whether to require utility companies to cover part of Winter Storm Uri-related costs themselves.