CenterPoint's 4.9% natural gas rate hike OK’d, more coming

  • Article by: DAVID SHAFFER , Star Tribune
  • Updated: September 12, 2013 - 11:03 PM

More CenterPoint Energy increases are in the offing to pay for upgrades to aging pipeline network.

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Minnesota regulators on Thursday approved an interim 5 percent rate hike for natural gas customers of CenterPoint Energy in the state. File photo of CenterPoint headquarters in Houston.

Photo: Daniel Acker, Bloomberg News

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CenterPoint Energy customers in Minnesota face an immediate rate hike and more increases in the future as the state’s largest natural gas utility makes a big push to rebuild its aging pipeline network.

A 4.9 percent interim rate increase that takes effect Oct. 1 was approved Thursday by the state Public Utilities Commission. That rate will stay in effect for about 10 months as regulators review a slightly larger permanent rate hike.

CenterPoint, which serves 823,000 customers in Minneapolis and 260 other Minnesota communities, says it will more than double investment in its distribution system from $65 million a year to at least $140 million a year for up to 15 years.

The Houston-based company, which last sought higher Minnesota rates in 2008, told regulators that customers likely will need to pay even more over the next seven to 10 years.

“We believe there will be more rate hikes than in the past,” Joseph Vortherms, CenterPoint’s Minneapolis-based division vice president for regional operations, said in an interview Thursday.

The company said it won’t immediately seek another rate hike next year and left open what may be coming after that.

CenterPoint is like many urban gas suppliers that have been in business for a century or more. It operates a vast, aging network of buried pipelines, much of it built from the 1940s through the 1960s as the nation’s population boomed, Vortherms said.

Now, the company says more of that infrastructure needs attention, and at a faster pace, under federal safety regulations that have required all utilities to systematically study their systems’ risks, a process called “integrity management.”

On CenterPoint’s system, for example, there still are 46 miles of cast-iron distribution pipes, mostly installed before 1930. That kind of obsolete pipe was implicated in a February 2011 gas explosion in Allentown, Pa., that killed five people and destroyed eight homes.

“The intent of integrity management was to start to uncover all of this stuff and make it more public,” said Rick Kuprewicz, president of Accufacts, a Redmond, Wash., pipeline safety consulting firm. “There are going to be some costs associated with this. People are getting tired of the terrible failures.”

Across the country, many gas utilities are boosting infrastructure investment to comply with federal rules, according to the American Gas Association, the industry’s Washington-based trade group. Just replacing the nation’s cast-iron pipes, mostly installed before 1950, is expected to cost $80 billion over 20 years, said Philip Bennett, managing senior counsel for the ­association.

Utilities like CenterPoint see the timing as right. Customers’ bills actually have gone down about 25 percent since 2008 thanks to the growing volume and lower price of natural gas from the boom in shale extraction. In Minnesota and other states, utilities only earn money delivering gas. Lower gas costs have been passed on to customers via the fuel adjustment on their bills. “This is a very good time to invest in infrastructure,” Bennett said. “Since gas prices are low, we can afford to spend more money on infrastructure.”

Besides replacing old iron pipe, CenterPoint also plans to accelerate replacement of 54 miles of transmission line. Hundreds of miles of bare steel mainlines also would be improved over the next decade or more. The utility also wants to accelerate removal of 89,700 gas meters inside customers’ homes that will be replaced with outside meters.

Yet another project would replace the last remaining 8 miles of buried polyvinyl chloride pipelines installed in the 1960s. The brittle material is more vulnerable to breaking, the company says. Most gas distribution pipes now are made of polyethylene, a durable, flexible plastic.

The projects would keep about 400 workers employed for years, the utility says.

CenterPoint, which is double the size of the next largest Minnesota gas utility, has more work to do than the state’s other major gas companies. Xcel Energy, with 437,000 gas customers in St. Paul and elsewhere, said it has completed replacing all its iron pipes. So has Minnesota Energy Resources, the state’s No. 3 gas supplier with 217,000 customers in Rochester and other communities.

Vortherms said CenterPoint’s infrastructure investments aren’t driven by immediate safety issues or accidents, including the March 2011 rupture of a 20-inch transmission line in south Minneapolis.

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