Minnesota utility regulators should slash CenterPoint Energy’s proposed natural gas rate increase almost in half, the state Commerce Department said Tuesday.
The department, which analyzes utility rates on behalf of consumers, recommended a $21 million reduction in the $44 million rate increase requested by CenterPoint Energy.
In a statement, the department said CenterPoint will be able to offer safe, reliable service and make improvements to its distribution facilities even with a 48 percent reduction in what it seeks.
“On behalf of ratepayers, we carefully watch for unjustified rate increases and found areas in CenterPoint’s rate request that are excessive,” said Commerce Commissioner Mike Rothman in a statement.
Most of CenterPoint’s 823,000 customers in Minnesota are paying a 4.9 percent interim rate increase that took effect Oct. 1.
In its permanent rate hike, CenterPoint seeks a big increase in the monthly basic charge, which all residential customers pay regardless of gas usage. That utility would increase the charge 87 percent, from $8 to $15 per month.
But the Commerce Department warned that could trigger “rate shock” among customers, and recommended the monthly residential charge be raised to $9.50, or 19 percent.
The department also recommended that investors, not just customers, help pay CenterPoint’s employee bonuses. The department recommended that ratepayer-funded incentives be capped at 15 percent of employee pay — with investors picking up anything more.
In written testimony, department analyst Angela Byrne said ratepayers benefit when utility employees have an incentive to perform. “However, many ratepayers are on a fixed income, or may still be unemployed, and do not have the ability to earn incentive compensation themselves,” Byrne said.
Department analysts also projected that CenterPoint’s 2014 revenue in Minnesota will be $884 million, or $5.1 million more than the company predicts, reducing the need for higher rates.
The division also recommended a 9.3 percent return on equity, a full percentage point less than the company is seeking. In a separate filing on behalf of consumers, the state attorney general’s office recommended an even lower return of 8.78 percent on equity.
CenterPoint spokeswoman Rebecca Virden said the company will evaluate the department’s and other parties’ positions and respond by a Dec. 23 deadline.
Administrative Law Judge LauraSue Schlatter will hold public hearings starting next week. After a subsequent trial-like hearing to review the evidence, she will make recommendations to the state Public Utilities Commission.
The commission is expected to set permanent rates next June. If the interim rate turns out to be higher than the final rate, customers would get refunds with interest.