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CUB legal filing: Utilities should cover the $220 million cost of their poor management during Feb. ‘21 natural gas price spike

January 19, 2022
Annie Levenson-Falk

Published January 19, 2021

CUB is recommending that three Minnesota gas utilities be required to cover $220 million in costs incurred during the storm of February 2021. 

Last February, Minnesota’s gas utilities spent over $600 million more than usual on gas supplies due to a brief but extreme spike in the price of natural gas brought on by frigid temperatures that reached as far south as Mexico. Between February 13 and 17, 2021, the price of gas at regional trading hubs soared up to 70 times more than normal. (See this post for more on what happened and answers to some frequently asked questions, like: “Why do we have to pay for Texas’s mistakes?”)

Millions of Minnesotans get natural gas service from the regulated utilities CenterPoint, Xcel, Minnesota Energy Resources (MERC), and Great Plains Natural Gas. Those utilities are now making the case to the Public Utilities Commission (PUC) that their spending, while extraordinary, was prudent, and that they should be allowed to charge it all to their ratepayers. 

After carefully examining their actions, CUB has determined that neither CenterPoint, Xcel, or Minnesota Energy Resources took all reasonable measures to manage costs and reliability for customers. (CUB did not examine spending by smaller Great Plains Natural Gas.) Each utility spent millions of dollars more than necessary with the expectation that the costs would be covered by their ratepayers.

We examined how the utilities used the natural gas they had in storage, how they called upon customers who volunteer to have their service interrupted when necessary (and receive lower gas rates for doing so), and how they dispatched “peaking plants” that can be called upon to inject extra supply into gas lines when warranted. Customers pay for all of these resources precisely so that utilities can use them to reduce costs and maintain reliability. For all three utilities, we found that some or all of these resources were underused – and Xcel’s peaking plants were offline entirely.  

CUB is recommending that the PUC disallow CenterPoint from recovering $130 million of its spending from customers, Xcel $69 million, and Minnesota Energy Resources $22 million. Together, this represents about a third of the companies’ above-normal spending for February 13-17, 2021. The Minnesota Department of Commerce and Office of the Attorney General have both also recommended tens or hundreds of millions of dollars in disallowances for each utility.

A contested case is currently underway on this issue before Administrative Law Judges, who will make a recommendation to the PUC in May. The PUC will then make a final decision on whether, and to what extent, each utility will be disallowed from charging customers for their extraordinary spending. That decision will most likely happen in the early summer of this year. 

Based on PUC commissioners’ statements in a prior hearing, we anticipate they will make substantial disallowances. Here are a few choice quotes from commissioners:

  • “It appears to me there are hundreds of millions of dollars in imprudent costs.” –Commissioner Schuerger
  • “I think it’s important that the companies share the pain with Minnesotans on this.” –Commissioner Sullivan
  • “This has changed my worldview on where natural gas fits into our energy supply in Minnesota. I used to think it was a good transition fuel. I am second guessing that.” –Commissioner Tuma
  • “Utilities … will not recover all of these costs.” –Chair Sieben

Even while this review is ongoing, charges for the extraordinary costs are already on customers’ bills. We expect these charges to be adjusted later this year to account for the PUC’s decision. 

We will share updates as the case proceeds. In the meantime, here are some resources that can help with utility bills.

  • Energy Assistance provides grants toward past-due and future energy costs.
  • Affordability programs: If you qualify for Energy Assistance, you can also have future utility bills capped at a certain portion of your income through affordability programs offered by some utilities, including Xcel, CenterPoint, and Minnesota Energy Resources.  
  • Weatherization Assistance and low-income conservation programs provided through the utility offer free or low-cost efficiency improvements and appliances to qualifying households. 
  • All customers can get rebates and discounts on energy efficiency measures through the utility. 
  • Check out CUB’s efficiency tips to save money.

If you have questions, concerns, or would just like to talk with someone to see if there are ways to reduce how much energy you use, contact us: 651-300-4701, ext. 2, or info@cubminnesota.org.