Citing rising energy costs, Minnesota utility regulators Thursday slashed CenterPoint Energy's proposed interim rate increase and also ordered the company to give its customers more time to pay special charges stemming from last winter's mega-storm.

"As regulators, we can't have our heads in the sand and ignore significant [economic] constraints, particularly for the residential class," said Katie Sieben, chair of the Minnesota Public Utilities Commission (PUC).

Other PUC members voiced similar concerns.

"I am very concerned about rate shock among residential customers," Commissioner Joe Sullivan said at Thursday's PUC meeting.

In addition to facing whopping special charges stemming from last winter's Texas ice storm, Minnesota consumers saw natural gas prices double this fall compared to a year ago. And gasoline prices have hit levels not seen since 2014.

The PUC on Thursday also approved an interim rate hike of 7.1% for Minnesota Power's residential customers. Minnesota Power first proposed a 14.2% interim rate hike for all customers, but backtracked — at least for residents — before the meeting because of concerns raised by ratepayer advocates.

The Duluth-based electric utility, which has about 145,000 customers in north and central Minnesota, is seeking an overall rate increase of 17.6%, or $108 million.

The PUC usually grants the interim rate hikes proposed by utilities. Interim rates — CenterPoint's and Minnesota Power's included — go into effect Jan. 1, and the PUC then takes 10 to 18 months to hash out the full rate request. The commission next week will take up the interim rate requests of Xcel, the state's largest electric utility and second-largest gas provider.

If in the end the PUC grants a full rate increase that is lower than the interim rate, customers are refunded with interest. Interim rate increases are normally applied equally to all utility customer classes — residential, commercial and government.

But PUC members Thursday said the pandemic and soaring energy costs have changed matters, and in both rate case decisions they declared "exigent circumstances."

CenterPoint, which has around 900,000 customers in Minnesota, last month filed for a rate increase of $67.1 million, or 6.5%. The company asked for an interim rate hike of 5.1%, which it says would add $3.32 to its average customer's monthly bill.

At the same time, CenterPoint filed a gas "rate stabilization plan" — effectively a substitute for the rate case. That alternate plan would raise overall rates by nearly $40 million, or 3.9%, resulting in a monthly bill increase of $2.40 for residential customers, according to CenterPoint.

CenterPoint's alternative plan also would extend a special surcharge repayment period from 27 months to 63 months. The surcharge stems from a gigantic price spike in natural gas in the Midwest after Texas' gas and electricity systems failed during a February storm.

By Minnesota law, swings in commodity gas costs are passed directly to consumers. So, customers of CenterPoint and three other investor-owned Minnesota gas utilities in September began paying down a $660 million storm tab over 27 months.

The PUC Thursday rejected CenterPoint's alternative plan, essentially finding that it would allow the company to spend money on capital projects without the investment review standards in a normal rate case.

While the PUC rejected CenterPoint's alternative plan, it adopted parts of it.

The PUC incorporated CenterPoint's 3.9 % rate increase from the alternative plan, as well as an extension of the payback period for the special storm charge from 27 months to 63 months.

Under the 63-month plan, the average CenterPoint customer will pay an extra $7.44 per month in 2022 and 2023, compared with $12.83 and $17.62 respectively under the 27-month plan, CenterPoint said.

CenterPoint told the PUC that the payback extension would essentially cost the company $6 million in financing costs. Still, the company didn't oppose — or support — the PUC's interim rate order Thursday.

"We appreciate the commission's decisions today, which are consistent with our original proposal and commitment to ease the cost burdens on our customers as we continue to deliver the reliable natural gas they count on every day," the company said in a statement.