MINNEAPOLIS — The Minnesota Public Utilities Commission launched a formal investigation into sudden spikes in natural gas wholesale prices that forced utilities to pay exorbitant amounts to purchase more supplies of that fuel.
CenterPoint Energy and Xcel Energy both are working with the PUC and suppliers to find ways to soften the impact, but part of those costs will eventually be passed directly to consumers through the rate setting process.
"It came to our attention that some gas utilities have spent as much as 50 times the price that they usually pay for natural gas," Aditya Ranade, Deputy Minn. Commerce Commissioner for Energy Resources, told KARE.
"So, there is a formal investigation that has now started by the Public Utilities Commission. And the Department of Commerce is assisting in determining what is the extent of the impact."
CenterPoint and Xcel both welcome the investigation, especially considering the price hikes were unprecedented even for a major supply disruption event.
During a presentation to the PUC Tuesday, CenterPoint said one supplier's price for a dekatherm of natural gas shot up from $3 in early February to $263 on February 12 and stayed that way for several days. A dekatherm is one million BTUs, or British Thermal units.
Fortunately, utilities had pre-purchased much of their supply for this winter with locked-in prices to hedge against major disruptions. But the extreme cold blast that descended into midwestern states and wreaked havoc on Texas forced CenterPoint and Xcel to shop for more gas on what's known as the spot market.
CenterPoint and Xcel don't make profits on natural gas but are typically allowed to pass actual costs along to customers. CenterPoint estimated Wednesday the average residential heating customer will pay an extra $250 to $400 for the price shocks unless there's some type of federal intervention. That cost would be spread across 12 months, most likely beginning in September of 2021.
Xcel Energy, in addition to home heating customers, also burns natural gas in several of its power plants. So the Presidents Day price shocks will also raise the cost of producing electricity. How much will be passed along to consumers remains an unknown for now.
"While we expect impacts due to the high natural gas prices during the cold snap, we'll work with our regulators and stakeholders to minimize the effects of those prices on our customers," read a statement from Xcel Wednesday.
Gouging inquiry
In the meantime, US Sen. Tina Smith of Minnesota is calling on the US Dept. of Energy to investigate what appears to her to be a case of price gouging.
"Producers to the spot market I think saw an opportunity, and their prices went up in some cases 100 times what is the typical price," Sen. Smith told KARE Wednesday.
"That is basically a massive transfer of dollars from places like Minnesota into the pockets of natural gas producers in Texas and other places. One CFO said this is a jackpot. But who’s paying for that jackpot? That’s the problem we need to solve here."
Sen. Smith said she's very hopeful the Federal Energy Regulatory Commission will step in and run a parallel investigation to what state regulators are doing.
Help with heating bills
The COVID-19 pandemic and accompanying economic crisis have led more families to apply for energy assistance, a federally funded program administered by the Minnesota Dept. of Commerce through local Energy Assistance Providers.
The phone number for your local assistance provider is:1-800-657-3710