CenterPoint drops pilot natural gas pricing plan

CenterPoint Energy has asked that an experimental program to charge higher prices to customers who use the most gas be put on hold after consumers complained that the program hurt those who could least afford it.

CenterPoint's request that the Minnesota Public Utilities Commission (PUC) allow it to restore flat-rate pricing for the November-to-March heating season shows that "we're listening to customers," spokeswoman Becca Virden said Monday.

CenterPoint is the largest natural gas company in the state, with 713,000 residential and about 85,000 business customers. CenterPoint estimates that 80 percent of its customers paid the same amount or less than they did before tiered pricing, while the others -- about 143,000 households -- saw their bills increase.

The PUC will hold a hearing on the issue Sept. 28 and tiered pricing could disappear with bills issued in October, Virden said.

State Attorney General Lori Swanson, who had asked the PUC to suspend the pilot program in June, endorsed CenterPoint's request.

"With cold weather right around the corner, it will be good if ratepayers are not subjected to another year of a program with indiscriminate and unintended consequences," Swanson said in a statement Monday.

CenterPoint was the only natural gas company in the state authorized to experiment with tiered pricing.

Xcel Energy, which has nearly 438,000 natural-gas customers in the state, most of them in the east metro area, "is not currently considering anything like that, so what CenterPoint is doing does not affect us," said Xcel Energy spokeswoman Patti Nystuen.

Three-year pilot

In what was to be a three-year pilot program for energy conservation approved by the PUC, CenterPoint began to charge higher unit gas prices in July 2010 to consumers whose homes used the most natural gas.

In addition, people who used the least gas got price breaks.

But Swanson cited consumer complaints showing the program had "unintended ramifications" for those who needed to maintain higher temperatures in their homes, such as the home-bound, senior citizens, and the sick, or for retirees, the poor and people with larger families or young children at home.

Swanson said the program was begun with good intentions but ended up "picking winners and losers ... for reasons that are unfair."

Asked whether CenterPoint could have foreseen this problem, Virden said the tiered-pricing was a fact-finding experiment.

"The purpose of the pilot program was to find out what the outcome would be," she said.

"Some people said it was great, that they actually had a lower bill. And some customers said they were doing all they could to conserve and were still paying a higher rate."

The tiered-rate pricing affected the 70 to 80 percent of a consumer's gas bill that reflected the price of natural gas, Virden said. Another 20 percent to 30 percent of the bill that is based on delivery charges wasn't affected.

The suspension over the winter that CenterPoint is seeking from the PUC would not, in itself, end the tiered-pricing program, Virden said. A decision to end it permanently would have to be made by the PUC.

During the expected suspension, Virden said, CenterPoint will review the tiered-pricing concept and "look at potential modifications based on our customer comments."

Tiers approved in 1983

In 1983, the Legislature approved a law authorizing "tiered natural gas pricing," also known as the "inverted block rate" program, Swanson said. But it didn't get off the ground until last summer, when CenterPoint agreed with regulators to try a five-tiered pricing strategy.

Gov. Mark Dayton recently signed a law that will eliminate the tiered-pricing structure after the experimental program ends.

Steve Alexander• 612-673-4553 • Paul Walsh • 612-673-4482