Published May 26, 2021
This past February, severe cold weather in Texas and the Midwest caused natural gas prices to spike nationwide. The price spike was caused by a “perfect storm” of: (i) increased demand (many households rely on natural gas for heat), (ii) reduced supply (some gas pipelines literally froze up in Texas and other southern states), and (iii) gas markets being closed over the long, Presidents’ Day weekend. This blog post provides an update on how Minnesotan natural gas users have been, and will be, affected by the price spike event.
Thankfully, Minnesota’s gas infrastructure was built to withstand extreme cold, meaning we (unlike residents of Texas) saw few disruptions in our natural gas service. However, a lack of service disruption does not change the fact that Minnesota’s gas utilities paid, on average, an extra $200-$400 per Minnesota household over a period of just 3 to 10 days to meet Minnesotans’ demand for gas during this period. Now, four of Minnesota’s investor-owned gas utilities — CenterPoint Energy, Xcel Energy, Great Plains Natural Gas Company, and Minnesota Energy Resources (“MERC”) — are seeking to recover those extra costs through additional charges that will likely appear on many Minnesotans’ gas bills beginning in September.
Soon after the February event, the Minnesota Public Utilities Commission (PUC) opened an investigation requiring each of the above gas utilities to file information on how it was affected by, and responded to, the event. For example, the PUC sought information on whether and how the utilities avoided purchasing gas at inflated prices by withdrawing gas from storage, exercising “curtailment” agreements, and utilizing other mitigation strategies. (Curtailment agreements are contracts that allow the utility to order certain customers — typically industrial customers — to cut back on their gas usage during a specified period, thereby making more gas available to other customers.)
Meanwhile, CenterPoint filed a petition seeking to pass $500 million (around $390 per household) in gas costs to its customers on an expedited time frame. CenterPoint requested to charge most residential customers an average of $15.40 extra per month from May 2021 through April 2023. As a part of this petition, CenterPoint sought to recover the “financing costs” it incurred to bridge the gap between paying suppliers for gas and recovering those costs from ratepayers. These financing costs initially included an 8.7% interest rate — meaning, if the petition were approved, CenterPoint shareholders and/or debt investors would make a considerable profit off the backs of CenterPoint’s Minnesota customers from this crisis. Additionally, CenterPoint asked to charge each residential customer the same amount, regardless of the amount of gas a customer uses.
Great Plains filed a similar petition seeking to pass $11 million (around $310 per household) in gas costs to its customers on an expedited time frame. MERC reported that they intended to pass approximately $75 million (around $225-$250 per household) in extraordinary costs through to their customers via automatic “true-up” mechanisms that allow utilities to make adjustments to customers’ bills each September to collect under-recovered costs incurred earlier in the year. Xcel, like MERC, proposed to pass $215 million (around $270 per household) in extraordinary costs to its customers through true-up mechanisms, but with adjustments extending the recovery timeframe over two years. Unlike CenterPoint, none of GreatPlains, MERC, or Xcel included financing costs among those they intend to pass through to ratepayers.
(We should also note that certain municipalities have already begun charging customers for the price spike — sometimes by applying very large, lump-sum charges on customers’ bills. The PUC does not have authority over municipal utilities, and, therefore, such utilities are not included in the PUC’s investigation. However, any Minnesotan who has received a large charge on their municipal gas bill may request a payment plan from their gas provider. If you run into any trouble, you can contact CUB at email@example.com, 651-300-4701 ext. 1, or 844-646-6282 ext. 1).
In collaboration with Energy CENTS Coalition, CUB has now filed three sets of comments in PUC dockets that relate to the February weather event. In those comments, we recommended that the PUC deny CenterPoint’s petition for expedited recovery and that the PUC deny CenterPoint’s request to recover financing costs from Minnesota ratepayers. We also recommended that the PUC open an additional notice and comment period as part of its investigation so that interested parties could learn more about all utilities’ mitigation strategies.
At a March 13, 2021 hearing, the PUC denied CenterPoint’s and Great Plains’ requests to expedite recovery of their extraordinary costs, declined to approve CenterPoint’s request to recover financing costs, and adopted our suggestions for topics to address during an additional notice and comment period. We were very pleased with this result.
CUB continues to work with Energy CENTS to request information from the impacted utilities and prepare additional comments challenging the reasonableness of some of the utilities’ extraordinary costs. We have also provided recommendations for how utilities can mitigate the impacts on residential customers and, at minimum, soften the blow on the most vulnerable households. We are currently working directly with CenterPoint and Xcel to help devise cost recovery strategies that minimize harm to low-income customers and those who are already behind on their gas bills.
Ultimately, the PUC will likely permit each of the four investor-owned utilities to charge customers for reasonable extraordinary costs they incurred during the February event. As a result, many Minnesotans will see their gas bills go up in the coming months. However, CUB plans to do as much as we can to ensure (i) utilities do not recover from ratepayers those costs the utilities should have avoided through better planning and decision-making, and (ii) that the way in which new charges are structured is as manageable for customers as possible. We are proud to serve in this role and increasingly conscious of its importance. If consumer advocates like CUB weren’t involved in dockets like this, the majority of Minnesota gas consumers would likely be unaware that, for example, an extra line item on their bill might include an 8.7% interest payment payable to the utility’s investors.
With this in mind, there is an opportunity now for public input into how the gas price spike is addressed. The PUC has informed us that they hope to receive more public comments related to their ongoing investigation of this matter.
If this issue is important to you, let the PUC know what you think by submitting a public comment using the form below or following the instructions on the PUC website.
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