CenterPoint unveils pilot program for 'renewable natural gas'

CenterPoint Energy has unveiled an unusual pilot program for "renewable natural gas," offering customers a greener — though more expensive — alternative to conventional gas.

Participants in the voluntary program would pay an extra monthly fee to get a portion or all of their gas from renewable sources such as landfills, sewage treatment plants and livestock manure. CenterPoint would buy the renewable gas from national suppliers and deliver it to homes through its existing distribution system.

CenterPoint, the state's largest gas utility, outlined the proposal in a filing Thursday with the Minnesota Public Utilities Commission (PUC), which must approve any such plan. It would be among the first offered by a U.S. gas utility, and it "would answer customer demand for renewable energy options," CenterPoint said in the PUC filing.

Consumers would determine how much renewable gas — in dollars — they wanted to buy.

"You would set your price as to what you were willing to pay per month," said Nick Mark, CenterPoint's manager of conservation and renewable energy policy.

In two separate surveys of its customers earlier this year, Houston, Minn.-based CenterPoint found a willingness to pay between $5 and $25 extra per month for renewable gas. Roughly half of the 1,550 survey respondents indicated that they "would probably or definitely be willing to pay an extra charge" for renewable natural gas, CenterPoint said in the PUC filing.

Of course, a survey declaration is considerably easier than actually agreeing to pay. CenterPoint is assuming 1 percent participation in the program, or about 8,000 of its approximately 800,000 residential customers, Mark said. The customers would have to commit to a renewable gas purchase for 12 months.

CenterPoint's proposal is akin to programs for wind and solar energy that have existed for years at electric utilities. While a CenterPoint customer would buy renewable gas each month, the gas would be mixed with conventional gas since the two aren't separated in the delivery system (just as electrons from wind, nuclear or coal energy sources can't be separated on the electric grid).

Also known as biomethane, renewable natural gas is produced by the breakdown of organic waste through the process of anaerobic digestion.

Renewable natural gas "is diverting a waste stream, which is always a good thing," said Margaret Cherne-Hendrick, a senior policy associate at St. Paul-based Fresh Energy, a research and advocacy group for renewable energy.

"Still, while this form of gas is renewable, that doesn't necessarily make it clean," she said. "At the end of the day, you are still producing methane."

Renewable natural gas is about 10 times more expensive than traditional natural gas. CenterPoint has structured its program so that customers pay in dollars, so there's no risk of being charged more due to fluctuating renewable gas prices.

"The way we want this to work is for the whole thing to pay for itself through customer enrollment," Mark said.

Still, ratepayers who aren't in the program would pay a small amount to help fund CenterPoint's bulk purchases of renewable gas. The average nonparticipating residential customer would see a 70 cent-per-year increase in their cost, Mark said.

Up to 10 percent of a participating customer's monthly renewable gas charge would cover administrative and marketing costs of the program. Even with that charge, CenterPoint doesn't expect to fully recover its administration costs, so it's asking the PUC to defer some expenses, possibly to a future rate case.

However, Mark said that even in worst-case scenario, the charge to nonparticipating customers wouldn't be more than the 70 cents per year.

CenterPoint is also asking the PUC for a "modest utility incentive" — a return — since the program would help the state meet its renewable energy goals, the PUC filing said.

CenterPoint asks for a distribution of 10 cents per therm of renewable gas, which would increase participants' cost by about 3 percent. A therm is a measurement of heat energy.

Mike Hughlett • 612-673-7003