** Minnesota gas utilities criticized for making Uri crisis worse on customers ([link removed])
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By Karlee Weinmann on Jun 13, 2022 07:00 am
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 ([link removed]) . 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 ([link removed]) . “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 ([link removed]) 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 ([link removed]) – 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.

Xcel, CenterPoint fumbles drove up costs

During the mid-February 2021 turbulence, spot market gas prices hit unprecedented highs, up as much as 350% above previous record highs ([link removed]) , according to the Department of Commerce. Within those days, the agency wrote, “the Gas Utilities knew that the economic burden on ratepayers of already incurred costs would likely be immense and the risk of incurring substantial additional costs was high.”

State agencies took aim at utilities’ government-granted monopoly status, which guarantees them no competition and customer-funded returns on their infrastructure investments in exchange for reliable, affordable service and prudent business operations. As Winter Storm Uri rocked Texas and reverberated across the country, they contend that Minnesota utilities failed to meet their obligations.

In a rundown of how the utilities failed to address the crisis in real time, the Department of Commerce pointed to several blunders ([link removed]) that it says caused higher-than-necessary costs. Among the many failures, the agency stated that Xcel and CenterPoint neglected to appropriately use so-called “peaker” plants designed specifically to ease periods of high demand, that Xcel relied on shoddy forecasting and then over-purchased gas when prices were at their highest, and that CenterPoint did not leverage its ability to require certain high-use customers to curb their consumption.

“Rewarding the utilities for robotically applying their business-as-usual practices to a historic event makes little sense,” the Department of Commerce wrote. “It sends the wrong regulatory signal. It amounts to a message that no matter how drastically circumstances change, utilities have no obligation to mitigate their costs because they can simply send the bill to customers.”

While Xcel has said it was impossible to anticipate the fallout from Winter Storm Uri, the Attorney General’s Office reminded regulators that monopoly utilities have a responsibility to plan and protect customers from undue risk – including by guarding against price shocks by purchasing gas in advance, when it’s affordable.

“Most everyone would agree that it would be imprudent for a homeowner not to have insurance on their house. Thus, if an uninsured home were struck by lighting and burned down, it would be easy to conclude that the homeowner was imprudent for not carrying insurance,” the office wr ([link removed]) o ([link removed]) te in its filing ([link removed]) . “This would be true even if (1) the homeowner had no reason to think their home would be struck by lightning that day; (2) if the weather forecast did not call for lightning that day; and (3) no house in that neighborhood had ever been struck by lightning.”

Utilities cash in as customers struggle

The dispute in Minnesota underscores a widening divide between utility executives and shareholders, who have enjoyed high profits in recent years, and utility customers who are struggling as fossil gas dependency propels their bills to the highest levels in years. Indeed, fossil gas price volatility drove up the average CenterPoint residential bill in Minnesota to $180 in January 2022, up $70 from the year prior ([link removed]) . As of January, roughly 11% of CenterPoint and Xcel customers in the state had fallen behind on utility bills.

Meanwhile, executives at both CenterPoint and Xcel celebrated healthy returns quarter after quarter that culminated in strong finishes to 2021. CenterPoint CEO David Lesar – whose $37.8 million compensation package last year ([link removed]) blew well past other utility executives – said 2021 was “a great year for CenterPoint ([link removed]) ” as the company made $1.4 billion for its shareholders ([link removed]) . Xcel closed out 2021 with $1.6 billion in profits ([link removed]) , and CEO Bob Frenzel called it a “solid year
([link removed]) .”

CenterPoint also recently raked in $1.3 billion in after-tax proceeds ([link removed]) by selling its stake in a separate gas company that has been accused of price-gouging during Winter Storm Uri.

Sticking customers with all disputed costs from February 2021 would be inappropriate and against Minnesota law ([link removed]) , the Citizens Utility Board of Minnesota wrote in a filing this month. The nonprofit, which advocates for customers, cited state law that requires any doubts over the reasonableness of utilities’ action to be resolved in favor of customers. It also noted outrage among many households grappling with rising bills.

“While we commend the utilities for providing reliable service during a very challenging and unprecedented event, we continue to regularly hear from consumers who are angry, confused, and deeply frustrated about having to pay for storm-related costs that they had no ability to control or avoid,” CUB wrote. “We find it hard to accept that there was nothing any of the Gas Utilities could and should have done differently, based on what they knew or should have known prior to and during the February Event, to shield their captive customers from the enormous costs those customers will now be required to bear.”

Dozens of utility customers have also submitted comments to the Public Utilities Commission opposing increased costs.

Utilities keeping customers tied to expensive fossil gas

Utilities have for years claimed fossil gas investments are affordable and reliable, but Winter Storm Uri and market disruptions have exposed the risks of relying on an energy source whose costs can swing sharply and validated growing calls ([link removed]) to decrease reliance on the fuel. Fossil gas prices remain high and volatile, and despite widespread interest among policymakers and customers in pursuing lower-carbon alternatives that are less risky and cheaper, both CenterPoint and Xcel are working to squash those opportunities.

CenterPoint continues to offer Minnesota builders luxury vacations ([link removed]) and rebates if they install uneconomic fossil gas appliances rather than electric alternatives that deliver bigger savings for customers. In a March agreement ([link removed]) awaiting regulatory approval, CenterPoint said it would stop using customer money to fund builder incentives for gas water heaters, but an ad from this month ([link removed]) shows it has not stopped the practice – it just may have found another funding source. The scheme locks in fossil gas pipeline extensions and consumption that boost CenterPoint’s bottom line for years to come, with worse outcomes for customers and climate change.

Xcel has invested heavily in Republican legislative control ([link removed]) in Minnesota. The nearly $115,000 the utility’s PAC has given to GOP candidates since 2017 has helped cement a GOP-led Senate that is widely seen as the state’s biggest barrier to climate and clean energy progress ([link removed]) . This year, the Senate refused to pass legislation that would have provided funding for cost-saving building weatherization upgrades, investment in electric vehicles, support for electric panel upgrades to enable building electrification, and more. Senate Republicans also attempted to pass a provision that would have prohibited local governments from providing residents and businesses an offramp from pricey fossil gas by limiting new hook-ups.

Photo credit: Ken Wolter via Shutterstock ([link removed])

The post Minnesota gas utilities criticized for making Uri crisis worse on customers ([link removed]) appeared first on Energy and Policy Institute ([link removed]) .
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