When CenterPoint asked for a 5 percent rate hike in Minnesota, the utility proposed a shift to higher fixed customer charges — and now finds itself defending the idea.
CenterPoint Energy on Monday defended its request to boost the fixed charge for delivering natural gas, saying it will be fairer to Minnesota residential customers.
The state’s largest natural gas utility has faced criticism from state agencies and AARP-Minnesota for proposing an 87 percent increase in the monthly basic charge. Under CenterPoint’s plan, a separate usage-based rate would drop, resulting in an overall increase of 5 percent.
The basic charge, which CenterPoint wants to increase from $8 to $15 per month, is paid regardless of how much natural gas a customer uses. The proposed change is part of CenterPoint’s request for a $44 million rate hike pending before the state Public Utilities Commission.
Most of the company’s 823,000 Minnesota customers have been paying an across-the-board interim 4.9 percent hike since Oct. 1. The increase, like the requested permanent rate hike, is for delivering gas. Utilities don’t make a profit on natural gas, and pass on price changes to customers.
In its defense of the proposed 87 percent basic-charge increase, CenterPoint said customers who use lots of gas are, in effect, subsidizing the cost of delivering gas to low-use customers. That’s because delivering gas is largely a fixed cost no matter how much energy a customer uses, the company said.
“Low-usage customers are not being harmed,” Burl Drews, CenterPoint manager of rates and regulatory research, said in written testimony about the proposed change. “They are merely being charged a price closer to their actual cost.”
Low-use customers potentially affected include winter-traveling snowbirds whose furnaces are turned down or off, apartment dwellers who use little gas, people who use natural gas for things other than heat and those who aggressively conserve energy. For a low-use customer (554 therms a year), the change in the basic charge would cost an additional $31 annually, CenterPoint said.
By contrast, the utility said, a typical customer would face no increase and would see less fluctuation in monthly charges. In summer, when natural gas use is low, the bill would be a few dollars higher. Winter bills would end up a few dollars lower.
In a survey, “nearly two-thirds of the residential customers prefer a rate design that lowers their winter bills and decreases the month-to-month bill volatility,” Paul Gastineau, senior director of rates and regulatory policy for CenterPoint, said in written testimony.
CenterPoint filed the testimony with the PUC. An administrative judge will review it, then hold a trial-like hearing in January and issue findings in April.
Critics of CenterPoint have said the higher basic charge would be a shock to ratepayers and a discouragement to conservation. But CenterPoint disputed those claims, and pointed out that thanks to falling natural gas prices, customers are paying 60 percent less for the fuel than in 2008.
“This 60 percent reduction in the cost of gas is why it may be more difficult for residential customers to find cost-effective energy efficiency projects,” Drews said.
David Shaffer • 612-673-7090 Twitter: @ShafferStrib