June 13, 2022
Minnesota state agencies urged regulators in scathing filings this month to require gas utilities to absorb at least a portion of the combined $662 million in extra charges they racked up over a five-day cold snap in February 2021. The utilities are asking regulators for permission to force their customers to pay the entire cost.
The disputed charges stem from Winter Storm Uri, which caused catastrophic fossil gas infrastructure failures in Texas and sent gas prices soaring at the height of winter heating season. Minnesota utilities spent as much purchasing gas over those few days as they did for a “substantial portion” of the previous winter, according to the Minnesota Department of Commerce. The agency and others insist it didn’t have to be this way. If Minnesota utilities, led by Xcel Energy and CenterPoint Energy, had properly prepared and adjusted operations instead of continuing business as usual, they contend the impact on customers would not be so severe.
The Minnesota Department of Commerce and Minnesota Attorney General Keith Ellison’s office called on the Minnesota Public Utilities Commission – the five-member body that regulates utilities and sets their rates in the state – to require utilities and their shareholders to absorb their fair share of the costs. Regulators will have the ultimate say, but a pair of administrative law judges issued a nonbinding recommendation in May to stick customers with the full tab. State agencies contend the judges mischaracterized laws and precedent, inviting risk for customers and free rein for monopoly utilities.
“The [judges’] conclusions allow the gas utilities to abdicate their responsibility to make prudent business decisions based on changing market or weather conditions,” the Department of Commerce wrote in its filing. “The Gas Utilities are not drones; they have capability and responsibility to do more than mechanically procure gas supplies regardless of the circumstances. The Commission should reinforce that the Gas Utilities’ failure to engage their expertise to appropriately mitigate risk comes with financial consequences for all involved, not just ratepayers.”
The Department of Commerce, through its own analysis, found that $178.6 million in costs are related to utilities’ missteps and should not be passed on to customers – including $122 million that should instead be shouldered by Xcel and $45 million that should fall to CenterPoint. Ellison’s office asserted that at least $71 million to $92 million – and potentially even all – of the extraordinary gas costs could have been avoided if utilities had appropriately hedged, or purchased enough lower-cost gas to shore up their supply in advance of cold weather.
Smaller gas utilities seeking regulatory approval to saddle customers with unexpected winter storm costs include Minnesota Energy Resources and Great Plains Natural Gas.
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