Heating bill price shock could be felt in Minnesota, too

Minnesotans could face price shocks on their heating bills, the result of a nationwide gas-costs surge spurred by the great Southern freeze.

The Minnesota Public Utilities Commission (PUC) will scrutinize spiking gas prices at a quickly arranged meeting scheduled for Tuesday.

Meanwhile, U.S. Sen. Tina Smith on Saturday asked the Federal Energy Regulatory Commission to investigate the gas cost run-up, including possible price-gouging.

"What we are looking at here is the potential for utility bills to spike up hundreds of dollars," the Minnesota Democrat said in an interview on Monday. "On top of COVID, this could be more disastrous."

The pandemic-induced recession has already battered consumers, she said, pointing to rising gas and electric bill delinquencies.

Indeed, the average past-due monthly bill at CenterPoint Energy hit $227 in January, up from $196 in December and the highest since the coronavirus pandemic hit the U.S., according to a PUC filing last week.

At Xcel Energy, the average past-due monthly bill (for electric and gas customers combined) hit $508 in January, also a pandemic high and well above the $407 and $365 levels in October and July, respectively.

The historic cold wave that hit Texas and other parts of the South created a huge demand for gas — both for heat and electricity generation.

"Beginning Friday, February 12, 2021, natural gas spot prices across the United States skyrocketed to unprecedented levels, with increases of as much as 100 times the typical purchase price, or more," CenterPoint Energy, Minnesota's largest gas utility, said in a Friday PUC filing.

"This event has resulted in significant costs incurred for the purchase of natural gas needed to serve our customers," the filing said.

CenterPoint did not break out the costs, and company spokesman Ross Corson said it's too early to gauge the effect on customers' bills. Ratepayers shouldn't expect an immediate effect, he added.

But CenterPoint is concerned enough that it has asked the PUC to look at ways to mitigate fallout on consumers.

"We believe existing rate-recovery mechanisms may be inadequate to address the situation at hand," the company said.

Normally, the cost of gas — based on amount used — comprises about half of the average CenterPoint residential consumer's monthly bill. As is common in the industry, CenterPoint earns profits on gas distribution, not the commodity itself.

"There is no markup," Corson said.

But consumers will still pay for the commodity's steep price rise via a fuel-cost pass-through on their bills.

Minneapolis-based Xcel Energy, the state's second-largest gas utility and biggest power provider, reported experiences similar to CenterPoint's.

"Last week's [gas] price increases will likely have a noticeable impact on our customers' natural gas heating bills in the future but we expect minimal impacts to electric customer bills," Xcel said in a statement.

Gas is an important fuel for power generation, and direct swings in commodity gas prices are included in so-called "fuel riders" on a consumer's bill.

Xcel said it's beginning to work with the PUC on ways to minimize the gas-price hike's impact, including spreading costs over a longer time than normal on consumers' bills.

The company noted, though, that any cost increases in Minnesota "will be nowhere near the scale" of what's being reported by some electricity consumers in Texas.

Due to the big freeze, Xcel's electric and natural gas fuel costs increased about $1.2 billion through Feb. 16, with $650 million of that allocated to Colorado and $300 million to Minnesota, the company said in a recent federal securities filing.

In Minnesota, electric and gas service generally held up well this month even though temperatures hovered below zero for several consecutive days.

The problem was the widespread nature of the foul weather.

"There was extreme cold across many parts of the U.S., and at the same time there was a tremendous increase in demand for natural gas — and a reduction in gas supply," said Corson of CenterPoint.

Unwinterized natural gas infrastructure froze up in Texas and elsewhere in the South, driving a shortfall in electricity and gas itself.

Corson said CenterPoint buys a substantial amount of gas under long-term contracts, as is industry practice. But a portion is bought on the spot market, where prices skyrocketed.

Mike Hughlett • 612-673-7003