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CUB fights CenterPoint’s attempt to raise natural gas rates

October 14, 2024
Brian Edstrom

Last fall, CenterPoint Energy filed a general rate case with the Minnesota Public Utilities Commission (PUC). CenterPoint is asking to raise revenues by $136.4 million over two years, with a 6.5 percent rate hike in 2024 and a further 3.7 percent hike in 2025. If the entire rate request is granted, average household bills will increase by more than $100 per year (as compared to 2023 bills). 

Under state law, utilities are permitted to raise rates on an interim, or temporary, basis while their full rate increase request is being reviewed by the PUC. For this reason, a portion of CenterPoint’s proposed rate increase has already gone into effect. Beginning in January 2024, CenterPoint’s residential customers saw their bills increase by an average of around $5.91 per month. CenterPoint is now seeking a second interim rate increase for 2025. If approved, residential customers will again see their bills increase by an average of $2.00 per month beginning on January 1, 2025. 

A regulatory process is underway to determine whether CenterPoint will be permitted to implement its full rate increase. CUB has engaged two experts to help push back on CenterPoint’s requested rate increase. This article describes the positions CUB’s experts have taken in the case so far. 
 

CenterPoint should not be permitted to increase its profits at the expense of its customers 

In every utility rate case, the PUC must establish the utility’s authorized return on equity (ROE). Regulated utilities have a right to earn a reasonable return, but not an excessive one.  The authorized ROE is critical to determining the amount of money the utility is permitted to collect from its customers in order to distribute profits to its shareholders. At a simple level, the higher the ROE, the more customers pay, and the more shareholders profit.  

CenterPoint is asking to increase its authorized ROE from 9.39 percent to 10.3 percent, which alone would increase rates by around $14.5 million each year. In addition to being unreasonable, this request is bold: a 10.3 percent ROE is far higher than the ROE the PUC has authorized for any Minnesota utility in recent years.  

CUB hired an expert witness to push back on CenterPoint’s ROE request—Dr. Steve Kihm, who has also assisted us in recent rate cases filed by Xcel and MERC. Through his testimony and analysis, Dr. Kihm shows that CenterPoint’s requested ROE is far higher than is reasonable or necessary. He also shows that CenterPoint’s request perpetuates an unfortunate pattern of utilities requesting unreasonably inflated ROEs. Dr. Kihm recommends the PUC establish a much lower, 9.0 percent authorized ROE, which will provide CenterPoint with a reasonable return for providing safe and reliable gas service. We are confident in Dr. Kihm’s recommendation and analysis and look forward to seeing how it impacts the PUC’s decision.   

 

CenterPoint should not be permitted to recover membership dues paid to certain trade associations  

CenterPoint also seeks to charge customers for the dues it pays to certain membership-based trade associations, like the American Gas Association and Minnesota Utility Investors. CenterPoint has the burden to show why charging customers for its trade association dues is reasonable. Though utilities commonly request recovery of these expenses in rate cases, the PUC does not always permit that recovery—particularly when dues payments support lobbying efforts or other political activities that are not in ratepayers’ interest.  Some state legislatures have banned utilities from charging ratepayers for these types of expenses.  

CUB engaged Energy and Policy Institute journalist, Karlee Weinmann, to analyze CenterPoint’s request to recover certain trade association dues. In her testimony, Ms. Weinmann makes a strong case as to why CenterPoint’s request to recover $214,460 in annual dues to the American Gas Association (“AGA”) is particularly troubling.  

Ms. Weinmann highlights several ways in which the AGA’s efforts to promote gas usage and/or hinder efforts to increase energy efficiency and beneficial electrification are not in ratepayers’ interest. Examples include:  

  • Coordinating and convening “pro-natural gas campaigns” to “ensure a more coordinated and informed approach to these disparate initiatives”;   
  • Participating in federal rulemaking dockets and legal challenges to oppose improved energy efficiency standards for appliances;   
  • Hiring and deploying consultants to undermine scientific research on the health risks of gas appliances, despite internal awareness of these risks;   
  • Mounting efforts to subvert decarbonization efforts in the Inflation Reduction Act, specifically a program that supports homeowners replacing gas furnaces and stoves with electric options;   
  • Opposing building code improvements that would help consumers reduce their overall energy use and reliance on fossil fuels;  
  • Preparing materials that map out the “opposition,” including environmental non-profit organizations;  
  • Recruiting additional coalition partners for increased presence at the state and local level and activating fellow trade associations at the regional and local level for hearings, city council meetings, etc. to defend natural gas. 

 

CenterPoint’s Minnesota customers should not have to pay more than their fair share to support exorbitant executive compensation. 

Ms. Weinmann also provided testimony on the excessive compensation CenterPoint has paid to its top executives in recent years. CenterPoint reported $13,867,875 in CEO compensation for 2022, then $16,204,475 in 2023 – 140 times the pay earned by the median CenterPoint employee. Ms. Weinmann recommended that the PUC impose a cap on how much money CenterPoint can recover from its Minnesota customers to support the high compensation paid to its top ten highest paid executives. To be clear, imposing such a cap (as the Commission did in a recent Xcel electric rate case) would not dictate how much CenterPoint pays its executives—it would just require CenterPoint’s shareholders, rather than Minnesota customers, to shoulder a larger portion of that pay. This should not be a lot to ask: CenterPoint’s shareholders enjoyed $867 million in reported profits for 2023, $1 billion in reported profits for 2022, and $1.4 billion in reported profits for 2021. 
 

Get involved 

Public Hearings 

In the coming weeks, several public hearings are scheduled in CenterPoint’s natural gas rate case. Any Minnesotan who receives gas service from CenterPoint can attend these public hearings to share your thoughts with CenterPoint, other parties involved in the rate case, and an administrative law judge overseeing the process. If you are interested in participating in a public hearing, see the schedule of hearings below, and click here for additional information.  

Written Comments 

You can also submit a written public comment to the PUC. Written comments can be submitted online or sent by email to consumer.puc@state.mn.us. All written comments should reference Docket No. 23-173 and should be filed before December 20, 2024. (Please note that everything in your comment will become part of the public record.)  Additional information on filing a public comment is available here. 

The Clean Heat Minnesota Coalition has an easy form for any CenterPoint customers specifically interested in submitting a comment opposing rate recover of AGA dues. 

Track ongoing developments in the rate case 

Meanwhile, parties involved in the rate case will have additional opportunities to file testimony, cross examine others parties’ witnesses, and file legal briefs further supporting their recommendations. Keep an eye on the CUB website for updates as we continue to fight for consumers. Sign up for our newsletter to stay up to date on CenterPoint’s rate case.