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Minnesota Attorney General Keith Ellison’s office has concluded that the state’s utilities mismanaged natural gas procurement after a historic winter storm in the South, leading them to overbill their customers for $380 million in wholesale gas costs.
The office said Wednesday it is recommending the state Public Utilities Commission (PUC) allow utilities to recover only 53% of the $800 million in costs they are trying to pass down to consumers, saying the companies could have reduced their wholesale gas bills during the run-up — but failed to do so.
“While Minnesota utilities did not cause Winter Storm Uri or the run-up in natural gas prices, they should have reacted forcefully to the pricing emergency and used every tool at their disposal to reduce costs,” Ellison said in a press statement.
Wholesale gas prices in Minnesota and many other states soared in February when the storm hit Texas and other natural gas-producing states. Temperatures plunged, gas field equipment froze up and supply cratered just as demand soared.
At the same time, Minnesota and the Upper Midwest was locked in its own deep freeze. The state’s gas utilities ended up scrambling for gas supplies as Midwestern wholesale prices rose at least 4,500%.
CenterPoint, the state’s largest gas utility, expects to pass down roughly $500 million in storm-related gas costs, or $354 per average household. Xcel, Minnesota’s second largest gas provider, estimates ratepayers’ tab to be $215 million Minnesota or $270 per household; MERC, the third largest gas utility, $75 million for $225 to $250 per household.
The utilities could not be immediately reached for comment.
The Attorney General’s Office said it “uncovered numerous instances in which Minnesota’s natural gas utilities could have reduced natural gas purchases during the price spike but failed to do so.”
Minnesota consumers should not have to pay for the utilities’ “mismanagement,” Ellison said.
The Attorney General’s investigation of the price-run up was filed Wednesday with the Minnesota Public Utilities Commission (PUC). The PUC is conducting its own inquiry, and takes into account investigations by the Attorney General and the Minnesota Department of Commerce.
In Minnesota, like most states, wholesale commodity gas costs are passed through directly to consumers, without a mark-up from the utility. Consumers benefit from lower prices and are hurt by higher prices.
Usually, gas price swings basically even out; but not this time.
In May, the Commerce Department concluded that the utilities should not be allowed to collect $90 million of the roughly $800 million in extra gas costs from the winter storm.
The Commerce Department said the utilities failed to draw enough gas from storage during the supply crisis, relying too much on the overheated natural gas spot market. The state’s utilities dispute this contention.
Storing natural gas is a hedge against rising prices. Utilities buy gas in the summer when prices are cheaper and inject it into underground storage spaces for winter use.
The Attorney General’s Office also concluded that the utilities failed to fully deploy gas from storage.
Its investigation found that utilities also failed to “maintain a diverse mix of suppliers and pricing arrangements for gas; and failed to fully utilize “peaker” plants, which can cut natural gas usage for a short periods.
In addition, Ellison’s office faulted the utilities for not notifying their customers of the price spike so that they could voluntarily reduce consumption.
