Refunds Ordered for Utility Customers Gouged by Unpopular Environmentalist Energy Plan

Written by Tom Steward on .

puc photo stockThousands of CenterPoint Energy ratepayers will receive refunds after being overcharged on their heating bills under an experimental natural gas pricing system unveiled in 2010 by Minnesota environmental groups and state regulators.  The politically correct pricing program--designed to penalize ratepayers for using more than a pre-determined allotment of natural gas--was the focus of an April 2011 Freedom Foundation of Minnesota (FFM) investigation.

The Minnesota Public Utilities Commission (PUC) last week finalized a decision ordering CenterPoint to begin making adjustments to ratepayers’ bills for “problems arising from elongated billing periods.” Precisely how many of CenterPoint’s nearly 800,000 Minnesota customers were overcharged and by how much remains to be determined.

This development is the latest embarrassment for the “inverted block rate pilot program” drafted by environmental groups in collaboration with state regulators. Under the pricing scheme, the more natural gas a customer used, the more the customer had to pay for each unit of natural gas—a penalty for using more than the average ratepayer. Some critics have compared the system to “charging a Prius driver $2 per gallon for gasoline, while charging an SUV owner $5 per gallon.”

The pilot program, however, backfired within months, turning into a public relations nightmare for the utility company. Hundreds of irate CenterPoint Energy ratepayers revolted over skyrocketing heating bills. The PUC was deluged with complaints from the elderly, day care providers, large families, low-income individuals and even conservation-conscious customers, all concerned about the financial impact this pricing scheme had on their heating bills. The controversy led to the suspension of the pilot program and the 2011 legislative repeal of this controversial provision from the 2007 Next Generation Energy Act.

As it turns out, what state regulators now call “unintended consequences” arose not only from the price structure itself but also from the utility’s habit of billing some ratepayers for much longer periods than others. “As a result, two customers with identical consumption patterns might pay different amounts depending upon when CenterPoint chose to bill the customers. In particular, bills that covered an unusually long period would be more likely to cause customers to pay higher rates—and the record reveals that CenterPoint sometimes billed customers for periods exceeding 35 days,” according to the PUC’s April 3, 2012  order.

Despite the program’s deep unpopularity, the Izaak Walton League and Minnesota Center for Environmental Advocacy are urging the PUC to reinstate the variable pricing system which they helped develop and implement. The environmental groups insist the program’s premise will be effective in reducing energy consumption “with exemptions for customers who cannot make adjustments to their energy usage.”

The Minnesota Attorney General, however, has urged the PUC to permanently end the troublesome program. In papers filed online, the attorney general’s office stated the program “has not been shown to encourage energy conservation or to assist lower-income people” in any measurable way. “The program’s ‘solution’ may be worse than the first attempt.”

The pilot variable energy pricing pilot was originally intended to run for three years. While the Minnesota Legislature has abolished the program, the PUC still has to decide whether to revamp and resume the program for the final year of the original pilot timetable.

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The Freedom Foundation of Minnesota is an independent, non-profit educational and research organization that actively advocates the principles of individual freedom, personal responsibility, economic freedom, and limited government. 

By focusing on some of the most difficult public policy issues facing Minnesota, we seek to foster greater understanding of the principles of a free society among leaders in government, the media, and the citizenry.