PUC approves CenterPoint Energy’s nearly $106 million plan for decarbonizing the natural gas system 

In late July, the Minnesota Public Utilities Commission (PUC or the Commission) held a two-day hearing to review CenterPoint Energy’s Natural Gas Innovation Act (NGIA) plan to invest over $105 million in pilot programs to decarbonize its gas system. The NGIA, passed by the state legislature in 2021, allows natural gas utilities to test out different technologies and strategies that could be used to help Minnesota reach its goal of net-zero economy-wide greenhouse gas emissions by 2050. 

The Commission approved all of the pilots in CenterPoint’s plan, with a number of small modifications that primarily set additional reporting requirements the utility will need to include in future filings. CUB and other stakeholders that reviewed and commented on the plan generally supported its approval, but have voiced disappointment over the lack of guardrails and customer protections ultimately adopted by the PUC. Nevertheless, the Commission’s approval constitutes a critical step forward on the pathway to decarbonizing Minnesota’s natural gas system, and CUB will continue to monitor the utilities progress to ensure customers are protected throughout the process. 

For more background, read CUB’s earlier blog describing CenterPoint’s plan and additional requirements under the NGIA.  

What did the PUC ultimately approve? 

The PUC approved, at full budget, all seventeen pilots proposed by CenterPoint—including a $40 million proposal to purchase RNG through a request for proposal (RFP) process and a $4.6 million proposal to construct and operate a new green hydrogen facility in Mankato.  

Renewable Natural Gas 

CUB and several other stakeholders expressed concerns around the RNG pilot size and scope. Because CenterPoint planned on using an RFP process, the ultimate cost per unit of RNG was unclear at the time of the PUC approval. With that ambiguity, CUB recommended the size be limited.  

CUB also recommended the scope be limited to allow only the purchase of bundled RNG, which would include both the physical gas itself, as well as the environmental attribute credits that signal the gas was “renewable” and therefore less greenhouse-gas intensive. CenterPoint suggested it would try to purchase bundled RNG but would also consider bids for the sale of environmental attributes only, without the gas.  

Although the PUC did not limit the size or scope to require bundled RNG, it did require the utility give preference to bids that are 1) injecting RNG directly into CenterPoint’s natural gas system; 2) injecting RNG into pipelines within Minnesota, or 3) injecting RNG into an interstate pipeline system that delivers to Minnesota within certain neighboring states (in that order).  

Green Hydrogen  

CUB and other parties also recommended the PUC deny the proposed green hydrogen pilot. CenterPoint is already running a nearly identical pilot in Minneapolis that has yet to reach its expected performance levels. CenterPoint asserted the new facility would also test the use of solar power and hydrogen storage, which are not used at the Minneapolis site. The PUC ultimately approved the pilot despite stakeholder concerns.   

Additional Customer Protections 

Beyond specific pilot concerns, there were a number of overarching issues CUB raised. Critically, CUB recommended the PUC impose additional requirements surrounding CenterPoint’s request to modify pilot budgets by up to 25 percent without Commission approval. Because some pilots—like the RNG pilot—had drastically larger budgets than others, CUB was concerned with how much the costs could shift if CenterPoint was allowed to freely reallocate funds by such a substantial amount.  

The PUC ultimately agreed with CUB that additional restrictions were required and adopted nine conditions to restrict how CenterPoint could use the 25 percent variance, including: 

• prohibiting use of budget flexibility in a way that would prevent other pilots from being sufficiently funded 
• requiring CenterPoint to describe how it used the budget flexibility and justify why it was warranted in its annual filing 
• prohibiting budget flexibility until the third year of the plan to allow pilots a chance to reach maturity  
• requiring CenterPoint to ensure each customer class only pays for pilots that benefited their class (i.e. residential customers do not pay for pilots that benefit only industrial customers and vice versa), and 
• prohibiting CenterPoint from reallocating funds between pilots for alternative fuels versus all other pilots  

The PUC also adopted CUB’s recommendation to require certain information about cost recovery in annual report filings. 
 

The Big Picture: What does this mean for Minnesotans moving forward?  

The NGIA provides utilities the opportunity to begin investing in scalable and innovative solutions to help decarbonize the gas system and reach the state’s 2050 climate goal. Although the PUC’s decision to approve the entirety of CenterPoint’s plan did not address all of CUB’s and other stakeholders’ concerns, we recognize the critical need for swift action to jumpstart decarbonization efforts. Importantly, the NGIA—and this initial plan approval—represents just one piece of Minnesota’s broader strategy to manage an equitable transition to decarbonize the natural gas system. 

1. Annual NGIA review: The PUC’s decision gives CenterPoint approval to move forward with its proposed pilots, but the utility will still be required to file annual updates on every individual pilot and the plan as a whole. Each filing will include a period for parties and the public to comment on the report, and the PUC has the power to impose modifications to the plan. CUB will carefully scrutinize CenterPoint’s investments to ensure benefits to customers are being realized in the most cost-effective way, and that unreasonable spending isn’t recovered from ratepayers inappropriately. 
2. Cost-effectiveness objectives: At the end of the 5-year NGIA term, the PUC will evaluate how CenterPoint’s plan performed by considering whether it met certain cost-effectiveness objectives identified in advance. If the Commission finds the plan “successful,” CenterPoint will be allowed to request a budget increase for its next plan. The PUC required CenterPoint to file the cost-effectiveness objectives within 30-days of the Commission’s order, so stakeholders will have another opportunity to review those metrics before they go into effect. CUB will also have an opportunity to comment during the review process at the end of the NGIA term to ensure budget increases are only allowed if meaningful progress is made towards decarbonization and other overarching goals.  
3. Gas Integrated Resource Planning (IRP): Outside NGIA, CUB has been actively involved in efforts to require gas utilities to file regular, forward-looking plans that outline what resources it will invest in to meet energy demand. Successful NGIA pilots can later be scaled up into larger programs or resource options for the utility through gas IRPs. You can read more about gas planning in our recent blog post.  
    

Get Involved: Xcel’s NGIA Plan 

Xcel Energy also filed an NGIA plan in December 2023. Because Xcel serves less natural gas customers than CenterPoint, the company’s total proposed budget is smaller—around $58 million over the five-year period. CUB and other stakeholder are currently reviewing Xcel’s proposal with plans to file comments in the coming months. 

Anyone can file public comments on Xcel’s NGIA Plan. If you have questions or concerns about the plan that you would like to raise with the PUC, there are a few ways you can do this. You can write a comment online or send an email to consumer.puc@state.mn.us. Make sure to reference Docket No. 23-518 so your comments are filed in the correct proceeding. Please note that everything in your comment will become part of the public record. Comments should be submitted before October 28. Keep an eye on our blog and social media pages for additional updates on this topic.