The Minnesota Public Utilities Commission has voted to allow CenterPoint Energy to raise rates for its 800,000 customers across the state.
The increase includes a pilot program that will test a new way of charging customers, which is designed to separate the utility company's earnings from its customers' energy use.
Here's how the pilot program will work: The less natural gas customers use, the more money they'll save on their utility bills. The more natural gas they use, the higher the rate they'll pay.
For CenterPoint, this means the company will occasionally adjust rates as people conserve gas so that it doesn't hurt its bottom line.
Janet Gonzalez with the Public Utilities Commission says the commission adopted measures to limit how much the company can raise those rates as people use less gas. And CenterPoint won't be able to keep any extra money earned from overage charges.
"The commission put a little more protection for customers, so that they wouldn't have as much risk of having to pay higher rates overall from that," said Gonzalez.
While the commission approved the rate increase, it's a smaller hike than the company requested, and less than a temporary increase that went into effect in January.
The rate hike totals about $43 million, nearly $17 million less than the company requested. Customers at some point will get a refund with interest for the difference between the temporary raise and the final one.
Gonzalez said the commission is still determining that final rate increase, and it will have those numbers within the next few days.
CenterPoint officials say the company needed this increase because it wasn't earning enough money to keep up with its business costs. Utility companies regularly ask the commission to adjust their rates. But this case involves an energy conservation element that has never been adopted in the state before.
The program stems from legislation passed in 2007, which directs the Public Utilities Commission to establish criteria and standards for a pilot program, such as this, with a utility company.
"We think this is good news for consumers and the environment," said Bill Grant with the Izaak Walton League of America, one of the environmental groups supporting the proposal.
"Consumers, because we think they are going to save on their natural gas cost as a result of the conservation measures that were enacted today," he said. "The environment, because we are lowering the amount of fossil fuels we are burning and that has an obvious benefit to the environment."
Advocates with the Energy CENTS Coalition also support the program, saying it will benefit low-income people. The organization cites research that shows low-income people use less energy at home.
But there is strong opposition from the Minnesota Attorney General's office and the Minnesota Department of Commerce. Vincent Chavez with the Commerce Department's Office of Energy Security says the program has several problems.
He's worried the cost of energy will shift from the utility company to the customers. Once the new rates kick in next spring, about 80 percent of the utility bill will be based on how often a customer uses natural gas.
"It is essential that consumers know that there is a newly approved program that they are going to be subjected to, and that there is potential for significant financial impact for customers in the higher consumption brackets," said Chavez.
Chavez added this experimental program comes with unknown consequences and risks. He says the program has no transparency, no way of tracking data on the program's results, and no concrete conservation and energy efficiency measures.
In addition, Chavez says this pilot program will only apply to residential and small business customers, which he says is wrong. CenterPoint Energy officials say its large business customers, which consume the most energy, already participate in conservation strategies. The company's Jeff Daugherty says a lot of people will work together to get this pilot program right.
"It's something new and different. It has to be proven. Doing different things takes time and takes courage," said Daugherty. "I appreciate the commission's decision to give us that opportunity to try to go out and prove ourselves." CenterPoint has 90 days to come up with concrete conservation measures that customers can adopt to use less energy and save money on their bills.
The company will work with some environmental groups and low-income advocates to come up with those strategies, and it'll have to work with the Office of Energy Security during that process. The new rates take effect next spring.