AG: CenterPoint’s Pricing System Unfair

Minnesota Attorney General Lori Swanson has asked the Minnesota Public Utilities Commission to assess the effects of CenterPoint Energy's tiered pricing structure, which charges customers higher rates as their gas usage increases.

Houston-based CenterPoint Energy's tiered pricing structure debuted less than a year ago, but it is already receiving criticism from state officials.

Minnesota Attorney General Lori Swanson filed documents Wednesday with the Minnesota Public Utilities Commission (PUC), asking the commission to assess the effects of the structure, which charges customers higher rates as their gas usage increases and requires some to pay more than the true cost of the gas they consume.

Swanson also asked that the pricing model be suspended and that CenterPoint charge customers the actual cost that the company paid its suppliers for the gas until the PUC concludes its assessment. That's how the company used to bill customers prior to the launch of its tiered structure.

CenterPoint provides natural gas services in six states and has about 5 million customers. It is the largest natural gas supplier in Minnesota with 800,000 customers in the state, 720,000 of which are residential customers.

CenterPoint's tiered pricing program-called the Inverted Block Rate (IBR) structure-launched last July as a way to encourage customers to conserve energy and use less natural gas. CenterPoint has since said that up to 20percent of its residentialcustomers, or more than 140,000 households, may facehigher bills as aresult of the new structure.

“The IBR structure is designed to encourage and incent energy conservation and reduce energy usage,” CenterPoint said on its Web site. 

But Swanson said that the program has had “unintended ramifications on many ratepayers” and is financially punishing some people.

Swanson noted specific types of customers that are negatively affected by the new tiered system: senior citizens who consume more energy because they are home all day or need warmer living environments, people with medical conditions who need to stay warm, lower-income people who cannot afford energy upgrades or who live in drafty homes, and people with larger families or whose family members are home more often.

Rebecca Virden, spokeswoman for CenterPoint, told Twin Cities Business that the new pricing structure is “operating as anticipated” and said that the company will review Swanson's comments and respond accordingly by the deadline later this month.

Virden said that 80 percent of CenterPoint customers are paying the same or less than they were under the old pricing structure, and the 20 percent that are paying more are seeing an average increase of about $50 over the course of a year.

Swanson also claims that CenterPoint has increased the length of its billing cycles beyond 30 days, which is pushing customers into the higher tiers and thus requiring them to pay a higher rate.

But Virden said that fluctuations in billing cycles are normal and that CenterPoint has not changed its meter-reading process since the new IBR structure was implemented last year.

CenterPoint has until June 21 to file a formal response with the PUC in regards to Swanson's allegations.