CenterPoint Energy is proposing to spread the cost of a colossal natural gas price spike — $354 per household on average — over two years to help cushion the blow to Minnesota consumers and the company itself.
The deep freeze that paralyzed Texas last month ignited U.S. wholesale gas prices, leaving Minnesota's gas utilities with huge bills that they will pass down to ratepayers. CenterPoint residential customers could see their annual gas bill rise by about 50%.
"That's astronomical," said Annie Levenson-Falk, executive director of the Citizens Utility Board of Minnesota, a ratepayer watchdog group.
CenterPoint had a $500 million commodity gas tab in Minnesota over a 10-day period in February, 56% more than it spent during the entire year ending June 30, the company said in a filing with the Minnesota Public Utilities Commission (PUC).
"The February market conditions were extraordinary, and as a result, so were the costs incurred," CenterPoint said in the filing.
The $500 million in extra costs equates to $354 — without interest — for the average Minnesota household, according to Houston-based CenterPoint. The company, Minnesota's largest gas provider with 879,000 customers, had earlier estimated an average household cost of $300 to $400.
Since CenterPoint must pay its gas suppliers now — and rate payers won't pay until later — the company must borrow money, the filing said. CenterPoint's own financing costs would then be partly passed down to consumers.
So, the average CenterPoint household would pay an extra $394 including $40 in financing charges. To put that in perspective, CenterPoint says its average customer pays about $672 per year.
About half of that comes from the wholesale cost of gas. CenterPoint and other utilities pass that commodity cost directly to consumers without any markup.
Due to the big freeze last month, Minnesota's second and third largest gas providers — Xcel Energy and MERC — estimated last month that their average residential customers' bills would rise respectively by $250 to $300 and $225 to $250.
Those companies have yet to file a cost-recovery proposal with the PUC.
A utility customer's wholesale gas costs are based on a monthly forecast. Every September, the monthly differences between forecasts and reality are "trued-up." The true-up is then added or subtracted from customers' bills, spread out over the next year — and it's usually small.
But February's gas price shock will shatter Minnesota's usual true-up model. Not only will true-up costs be much higher, but they will hit consumers hardest in the winter months when their heat bills are already high.
Under the existing Minnesota framework, CenterPoint's total $354 charge would start with a $10 monthly payment in September and then rise to $57.42 extra in December; $68.05 more in January; and $55.35 more in February, the filing said.
Under CenterPoint's two-year proposal, customers would pay $15.62 extra per month from May through October, and then $6.25 from November through April — including financing charges. In the second year, monthly surcharges would rise to a peak of $31.25 from May through October, then drop to $12.50.
CenterPoint's low-income customers would pay half of the surcharge rate payers would generally pay under the company's plan.
"We are trying to ease the impact," said Ross Corson, a CenterPoint spokesman. The plan calls for the highest payments in 2022 because some customers are already having a hard time paying their bills due to the pandemic, he added.
February's gas price spike has prompted federal and state investigations across the country, including by the PUC.
Before the cold wave hit, gas prices at trading hubs in Iowa and Kansas — gateways of a sort to Minnesota — were just under $3 a dekatherm, within its normal trading range.
But on February 12, those prices began spiking, peaking at $188 and $231 per dekatherm respectively in Iowa and Kansas, according to CenterPoint's filing.
While CenterPoint and other utilities buy a considerable amount of gas under longer term contracts, they were exposed to the high-priced spot markets in February as gas demand also surged in the Upper Midwest due to a cold snap.
Costs of the February price spike "will impact CenterPoint Energy's cash-flow and available liquidity and may impact the Company's ability to obtain future financing on favorable terms," CenterPoint said in the PUC filing.
Moody's recently lowered its credit rating from "stable" to "negative," it added.
Mike Hughlett • 612-673-7003