Controlling costs and creating climate progress in CenterPoint rate case

Aaron Klemz, Chief Strategy Officer, MCEA St. Paul Office

Last week, the Minnesota Public Utilities Commission (PUC) issued a final order in the CenterPoint Energy rate case, setting the new cost of gas for consumers. MCEA is pleased to report that the final result holds down costs for consumers, prevents CenterPoint from making ratepayers pay for the expenses of marketing gas to builders, and continues the push to reduce greenhouse gas pollution.

You probably know that MCEA works at the PUC to retire coal plants and push electric utilities to transition to clean, renewable energy. But you may not know that we also work on cases involving gas utilities, including rate cases. So why do we do it, and what are we trying to accomplish?

Minnesota’s investor-owned utilities, both electric and gas, operate largely as regulated monopolies. Inside of their service territory, they have the exclusive right to offer electricity or gas. In exchange for this monopoly on gas or electricity, each utility is regulated by the Minnesota PUC, which has the power to approve or deny their plans, set the rates they charge, and otherwise ensure that they operate in the public interest.  

One-quarter of all of the energy used in Minnesota comes from methane (“natural”) gas, and one-quarter of that gas is used in residential buildings. CenterPoint is the largest regulated gas utility in Minnesota, with over 850,000 customers. This means that the economic incentives embedded in the way that CP bills its customers can be a significant driver of climate pollution. 

Residential greenhouse gas emissions remain stubbornly high in Minnesota. While electric utilities are making rapid progress toward decarbonization, residential, commercial and industrial properties have actually increased their greenhouse gas pollution over the past decade. Residential emissions are up more than any other sector - up 32% between 2005 and 2018 – in the most recent data available from the Minnesota Pollution Control Agency. For Minnesota to reach our climate goals, we need EVERY part of our community to work toward solutions. That means reversing this trend in residential buildings.

Going into this rate case, CenterPoint was pushing for a significant increase (6.5%) in the overall cost to consumers. The final settlement reduced this to a 4.2% overall increase. Of particular concern for MCEA was CenterPoints request to increase the monthly fixed fee that every customer has to pay. And we were successful. The PUC not only significantly reduced the overall rate increase requested by CenterPoint, they kept the monthly fixed fee at the exact same level as before.  This means that for all CenterPoint customers, the amount on your bills that you have no control over won't increase. This is good: it gives customers greater control over utility bills, and encourages energy efficiency.

The settlement also addressed the practice of billing ratepayers for the cost of marketing and incentive programs that encourages builders to install gas appliances. Through programs like residential water heater program and “Builders Club,” CenterPoint rewards residential property developers with cash incentives and vacations if they hook up to gas and install gas appliances. Thanks to the settlement, CenterPoint can continue to pay for these incentives out of their own pocket, but the PUC did not allow them to shift the cost of these programs to ratepayers. Since new construction needs to quickly shift toward efficient electric appliances in order to meet our climate goals, this was another big win. 

Finally, MCEA and our allies succeeded in getting bigger picture policy issues approved by the PUC for discussion about the “Future of Gas” in a separate proceeding (also known as a docket.) Since there are several gas utilities in Minnesota, and there are a number of cross-cutting issues about the future of gas utilities, the PUC has created an overarching proceeding to address the future of this industry.  MCEA believes we should not be investing in new gas infrastructure or creating incentives for new gas hookups for any  of the gas utilities in Minnesota. The PUC officially said that these are issues that need to be addressed in the Future of Gas docket for all gas utilities, and we look forward to that discussion. 

We can’t (and don’t) do this work alone. We work in coalition with other organizations (including Fresh Energy) and alongside state agencies (such as the Department of Commerce and the Attorney General) in rate cases and other proceedings at the PUC. The CenterPoint rate case brought together a broad coalition of groups and agencies pushing for these changes. We also rely on your support of our work to give us the ability to send strong advocates to the PUC. 

All Minnesotans should be proud of the result: lower bills and less greenhouse gas pollution.