Backlash Leads to Repeal of Controversial Natural Gas Pricing Program

FFM report highlighted disparities in heating bills for plan backed by MN green groups

ST. PAUL, MN--Thousands of CenterPoint Energy customers who were slapped with skyrocketing natural gas bills due to a controversial pilot program detailed in a Freedom Foundation of Minnesota investigative report may see much lower heating bills in the near future. 

The repeal of the so-called “inverted block rate” pilot program was among the reforms in the Omnibus Energy Policy Bill passed by the Minnesota Legislature and signed into law last Friday by Governor Mark Dayton.  The ink was hardly dry when Minnesota Attorney General Lori Swanson today also called on the Minnesota Public Utilities Commission (PUC) to suspend the controversial pricing system, citing “unjust and unintended consequences” for a wide array of consumers as the key factor in her request.  

Word that the increasing consumer backlash against the politically correct pricing program led to its elimination at the State Capitol surprised CenterPoint customer Peter Westerhaus of Chanhassen.  “It’s fantastic, I think the legislature did the right thing.  I think the governor did the right thing in signing it,” Westerhaus said. “There’s a commonsense approach to energy and this fits that category, versus the punitive nature of the tiered rate program.”

Despite the lowest natural gas prices in years, many CenterPoint ratepayers saw their energy bills spike this winter, thanks to an experimental pricing system imposed by the Minnesota Public Utilities Commission (PUC).  Some of Minnesota’s biggest environmental groups played a key role in crafting the controversial pilot program, including Energy Cents Coalition, Izaak Walton League, and the Minnesota Center for Environmental Advocacy. 

Under the three-year pilot also known as the “tiered energy program”, the first 30 “therms” (a unit of measurement) on the bill are discounted at a rate below cost, the next tier is charged approximately at cost, and the remaining three tiers are charged at increasingly higher rates per therm. The pricing structure does not take into account factors such as family income, household size, or energy efficiency investments made by homeowners.

One stunned homeowner from Dayton, Minnesota who received a February heating bill for $450 told the PUC in a blistering letter that she lives in a five-year old house with energy efficient windows, appliances, and furnace. “I know this was a colder year but these prices are outrageous,” Sue Harff wrote. “People are already losing their houses. Are we supposed to get priced out because of heat bills, too?”

Scores of irate and impassioned complaints are posted publicly on the PUC website. Concerns include the program’s financial impact on seniors, lower income families and others on fixed incomes, stay-at-home parents and daycare providers. Some question the program’s premise give the U.S. abundance of natural gas supplies.

“I am angry that CenterPoint put in place a system that forces us to pay higher gas bills at a time when the economy is slow and we have less money to spend,” Matthew Smith of Minneapolis wrote to the PUC in an email. “The timing couldn’t be worse…MY WIFE AND I CANNOT AFFORD TO PAY THESE UNFAIRLY ALLOCATED RATES.”

The pilot project grew out of the Next Generation Energy Act passed by the Minnesota Legislature and signed by Governor Pawlenty in 2007. The Act directed the PUC to “decouple” or change the way utilities raise revenue, relying less on the amount of energy sold, theoretically eliminating the disincentive forutilities to invest in conservation measures.


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