Minnesota heating costs are expected to rise, but not yet for bill payers

High Bridge startup
Xcel Energy's natural gas fired combined cycle generating plant beside St. Paul's High Bridge. State utility regulators are investigating how the big spike in natural gas prices last week could affect customers in Minnesota.
Tim Nelson | MPR News 2008

State utility regulators are investigating how the big spike in natural gas prices last week could affect customers in Minnesota.

Wholesale prices in many parts of the country rocketed to around 100 times normal as unusually low temperatures both hampered production in Southern states and led to huge demand across much of the country.

Minnesotans largely made it through last week’s cold snap with their gas service uninterrupted. Boilers and furnaces ran full tilt to chase away the negative double-digit chill. But the state’s big energy companies, Xcel and Centerpoint, told regulators Tuesday they paid far more than expected to their own suppliers to keep the hydrocarbons flowing.

At a Public Utilities Commission meeting, Amy Liberkowski, Xcel’s director of regulatory pricing and analysis, said the company had predicted that the average residential customer would burn about $50 worth of natural gas this month. That forecast was low.

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“We’re preliminarily thinking that we incurred about $300 per residential customer to procure that natural gas to serve them,” Liberkowski said.

Centerpoint executives said its costs were on par with Xcel’s, though the energy company is still working on the numbers.

That does not necessarily mean that the utilities will pass on those enormous bills to Minnesotans in the immediate future.

PUC financial analyst Bob Harding said that for now, customers will pay the price that their utilities had initially predicted for February. In Minnesota, any big costs that companies incur are dealt with later in the year.

“Customers will be billed for the amount of gas used in February at the February rate. There is a built-in deferral until September in the monthly purchase gas adjustment for any excess costs incurred in February,” Harding said.

Normally gas customers would pay those extra costs through 12 months’ worth of surcharges. Xcel’s Liberkowski said she’s open to spreading that out even longer. And Centerpoint’s Houston-based Vice President of Gas Supply Miles Kenny said customers should not have to deal with big price swings.

“We want to avoid what happened last week and make sure that it doesn’t occur again. And we are very open to finding solutions to protect our customers from what happened in the upstream market,” Kenny said.

The PUC is investigating how gas companies are planning for potential price spikes during extreme events, and how to ease the burden on low-income customers.

They may find some answers in what one small company seemed to get right.

Kristine Anderson said the customers of Faribault’s Greater Minnesota Gas won’t be seeing any price spikes because the company bought enough gas ahead of time and avoided last week’s exorbitant wholesale prices.

“We were able to leverage our long-term contracts and our storage gas, so we were not having to deal with spot gas prices, and we were able to stay out of that spot gas market when the prices were particularly high,” Anderson said.

A senator walks down a hall at the Capitol
Sen. Tina Smith, D-Minn., arrives as opening arguments begin in former President Donald Trump's impeachment trial on Feb. 10 in Washington. She has called for a federal investigation into high natural gas prices.
J. Scott Applewhite | AP

Over the weekend, Minnesota U.S. Sen. Tina Smith called for a federal investigation into how prices rose so high in the first place, and whether anyone broke the law.

In a statement, Gov. Tim Walz said the state will feel the effects of higher gas prices, and is focusing on municipal utilities that may need help as a result of the wide swing. The governor also said the federal government should aid Minnesotans who will have trouble paying energy bills.