Published August 22, 2022
Since the fall of 2021, most Minnesotans who receive natural gas from CenterPoint Energy, Xcel Energy, Minnesota Energy Resources (“MERC”), or Great Plains Natural Gas Co. have had an extra surcharge added to their monthly gas bills. These surcharges enable the above utilities to gradually recover approximately $660 million in extraordinary costs from their customers. The utilities incurred these costs by purchasing gas at inflated prices over the Presidents’ Day holiday weekend in February 2021, when Winter Storm Uri caused demand for natural gas to increase, natural gas infrastructure in Texas and other southern states to freeze, and natural gas prices to spike to historic levels.
Though recovery of those extraordinary costs has already begun, the question of whether the utilities will be permitted to collect the full $660 million amount has been subject to an ongoing legal challenge. CUB, along with the Minnesota Department of Commerce and Office of the Attorney General intervened in this legal proceeding to advocate on behalf of utility customers. We each recommended that the Minnesota Public Utilities Commission order the utilities to cover a significant portion of the extraordinary costs themselves.
Our recommendations were each based on independent experts’ analyses of the utilities’ actions and decisions during the February 2021 event. Through their analysis, CUB’s experts found that three of the four utilities (CenterPoint, Xcel, and MERC) could have avoided over $158 million in costs by more accurately forecasting the amount of natural gas they needed to purchase during the February 2021 event, by better utilizing peak shaving resources, and/or by calling on more of their interruptible customers to curtail their usage during the event. (Some utility customers, called “interruptible customers”, pay a discount on their natural gas bill in exchange for agreeing to curtail their usage on short notice when their utility calls on them to do so.) On August 11, 2022, the Commission held public deliberations on these matters and ultimately announced that it would “disallow” the utilities from recovering approximately $58.5 million of their collective extraordinary costs from their customers. The Commission disallowances, by utility are:
- Xcel – $19 million
- CenterPoint – $35.7 million
- Great Plains – $845,000
- Minnesota Energy Resources Corp – $3 million (settlement)
While we believe the facts supported a much higher disallowance, such disallowances are exceedingly rare. Generally, regulators defer to utilities’ decision-making and allow them to charge customers for all costs of fuel, no matter how high. Indeed, Minnesota’s Commission took a much stronger stance than utility regulators in other states, including Oklahoma, Texas, and Arkansas, where CenterPoint (Minnesota’s largest natural gas utility) was permitted to recover the full amount of its storm-related extraordinary costs (plus “carrying costs”).
In their deliberations and ultimate decisions, Minnesota’s Commissioners also delivered a strong message: utilities must balance their responsibilities to provide safe and reliable service with their responsibility to charge rates that are just and reasonable. Striking that balance requires acting proactively to protect customers from extraordinary pricing events such as those that transpired in February 2021. These decisions will have a profound impact on how Minnesota’s natural gas utilities operate in the future to help ensure they are much better prepared for future extraordinary events.
Despite the Commission’s actions, many Minnesotans will be understandably disappointed to learn that the above utilities will still be permitted to recover the vast majority of their February 2021 storm-related costs. That means many Minnesotans will continue to see a surcharge on their gas bill for years to come. We, of course, understand the disappointment and frustration over these costs — customers had no control over this event, over their gas utility’s actions, or over the poor planning in Texas that contributed to these high costs.
Fortunately, the Commission also ordered the utilities to file reports in the coming months that identify new and revised strategies for protecting customers from extraordinary pricing events in the future. We believe this presents a positive opportunity for the utilities – along with advocates like CUB – to refine and improve natural gas utilities’ planning processes and procedures to help ensure Minnesotans are far better protected from the impacts of future extraordinary pricing events. We will continue to advocate for consumers in those discussions and work to ensure consumers are protected from experiencing another extraordinary pricing event like this one.
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Why was Xcel not required to use a portion of their 2021 profit of $1.6 billion* to cover the increased costs?
(* according to a report on Businesswire on January 27, 2022, Xcel reported a 2021 profit of $1.6 billion)