SAINT PAUL, Minn. (Legal Newsline) - Minnesota Attorney General Lori Swanson asked the Minnesota Public Utilities Commission on Wednesday to suspend a Texas-based energy company's tiered pricing program pending further study.
CenterPoint Energy's pilot inverted block rate pricing program charges residential natural gas customers progressively higher per-unit-of-energy rates as their gas usage increases. The company is the largest natural gas supplier in Minnesota.
CenterPoint allegedly promoted the experimental pricing program to regulators as a way to encourage people to conserve energy, but Swanson's office alleges that the program appears to have unintended ramifications of higher rates to some who had made efforts to be energy efficient but could not afford upgrades. In addition, some consumers had allegedly higher rates due to the company's increase in the length of its billing cycle beyond 30 days.
"The pricing structure seems to be unfairly picking winners and losers among ratepayers," Swanson said. "It seems to be having unjust and unintended financial consequences on many people whose budgets are already tight. To make matters worse, the company has driven some customers into higher prices by lengthening its billing cycles."
Swanson's office said that inverted block rates appear to be financially punishing those who have taken steps within their budget to make their homes energy efficient or who could not afford energy upgrades and others who need to use more energy, such as senior citizens who consume additional energy because they are home all day, people with medical conditions who need to stay warm, lower income people who cannot afford energy upgrades, and people with larger families, such as those with young children. Swanson heard these problems as complaints from consumers across the state.
Typically, natural gas companies bill consumers for the actual usage at the rate paid by the utility to acquire the gas. Inverted block rates allegedly cause some ratepayers to face higher per-therm rates and therefore higher monthly bills at a time when the utility's cost to acquire natural gas has dropped. From 2008 to February 2011, the cost of natural gas dropped approximately $4.23 per thousand cubic feet. In January, a consumer in the lowest price tier one paid approximately 41 cents per therm while a consumer in the highest price tier five allegedly paid approximately 80 cents per therm.
Swanson's office said that the public utilities commission should further study the effect the program has on customers, including lower income households. Swanson alleges that 42 percent of customers in the 10 communities with the highest poverty rates paid the highest tier five rates in January, compared with 32 percent of consumers in the lowest poverty communities.
Since the program went into effect as a pilot program in January 2010 and into full effect in July 1, 2010, there have been complaints to regulators about these unintended consequences. The commission retained the discretion to terminate the program going forward "upon unfavorable review."
In addition, Swanson alleges that longer billing cycles may have pushed some customers into the highest fifth tier billing rate. CenterPoint estimates that over 1,700 accounts were pushed into the highest tier solely based on their monthly bills existing on billing cycles greater than 35 percent.
Swanson asked the PUC to suspend the program until further study can be done and asked that the PUC require the company to make refunds to ratepayers who were charged more per therm as a result of elongated billing cycles.