The severe cold in the southern U.S. last month will result in higher natural gas bills for a huge swath of Minnesotans. In response, a pair of Minnesota lawmakers have introduced a bill at the Legislature to help low-income people shoulder the extra costs.
The new measure would distribute $100 million to qualifying customers and spend another $15 million on a loan fund for municipal utility companies facing a budget crunch after the February polar vortex. Sponsored by Rep. Jamie Long, DFL-Minneapolis, and Sen. David Senjem, R-Rochester, the bill is scheduled for a Senate hearing Thursday after receiving a House hearing Wednesday.
While the measure would slash home heating bills for many customers, it won’t offset costs for all of Minnesota’s natural gas customers, who could see bills rise hundreds of dollars. CenterPoint Energy alone expects a $500 million hit in Minnesota because of the crisis, a staggering amount of money the Legislature is unlikely to cover.
“This just dwarfs the scale of anything that we have in place to protect those (low-income) folks, so that’s a really urgent need,” Long said of his bill during an interview Wednesday.
Crisis in Texas leads to high bills in Minnesota
The new surcharge coming to Minnesota heat bills is because of cold weather elsewhere. When an arctic blast froze Texas in mid-February, natural gas supply in the region seized up as demand skyrocketed. That drove up prices.
Utilities serving Minnesota buy plenty of gas ahead of time on fixed contracts, but they also buy some gas over the short term because it’s usually cheaper.
The Minnesota Public Utilities Commission estimated every residential CenterPoint customer could face a one-time bill of $300 to $400 over typical costs, though that charge is expected to be spread out over many months. Typically, the higher bills would start this fall and last roughly a year.
Under CenterPoint’s recent proposal filed with the Minnesota PUC, those fees would be spread out over two years, starting as early as May and phased in over time. The Houston-based natural gas utility also proposed reducing the heat bill surcharge by half for low-income customers. The remainder of the surcharge for low-income customers would be paid for by an increase on heat bills for hundreds of thousands of other natural gas users.
Xcel Energy residential customers could face a $250 bill while residential customers of Minnesota Energy Resource Company might see a fee increase of $200 to $225. Katie Sieben, chair of the PUC, told lawmakers earlier in March that the average monthly heat bill for Minnesota residential natural gas customers is $57.
Smaller, municipal-owned utilities face their own challenges. They have to start billing customers sooner, and many are cash-strapped after spending huge chunks of their budget to buy enough gas for customers during the February cold snap.
At the hearing Wednesday in the House Climate and Energy Finance and Policy Committee, Kris Manderfeld, director of New Ulm Public Utilities, said the cost to buy natural gas for the city of 13,500 people was a little more than $727,000 in January. In February, that same supply bill was roughly $7.5 million.
Some customers of municipal utilities are already seeing enormous price spikes on their bills, though Kent Sulem, government relations director for the trade group representing the municipal utilities, said they expect customers to reach out and work out deals to pay the surcharge back over time.
Other government officials are looking into the price spikes. The PUC is investigating how regulated utilities like CenterPoint and Xcel managed the crisis and if their purchases were reasonable.
The Minnesota Department of Commerce said in late February it was using more than $106 million in federal money to increase a heating bill subsidy for low-income people, doubling the maximum award from $600 to $1,200. State officials expect the Low Income Home Energy Assistance Program, or LIHEAP, to receive another $109 million from the $1.9 trillion federal stimulus bill approved by Congress in March. Information on applying for assistance with local service providers can be found on the Commerce Department’s website or by calling 800-657-3710.
But lawmakers said they need to step in to quickly help utility customers and the smaller municipal utilities themselves.
How lawmakers would address price spikes
The bill introduced by Long and Senjem would offer $15 million in zero-interest loans lasting up to five years to help municipal utilities pay for natural gas they bought during the February polar vortex.
Municipal utilities are on the hook now for their gas bills. Manderfeld told lawmakers that in order to pay the huge gas supply bill and allow customers to pay the corresponding surcharge over time, the loan program must be enacted quickly or else cities will have to drain reserve funds. That puts them at risk if another unexpected event hits.
For that reason, Long said the Legislature needs to pass the bill by the end of March.
The legislation would also create a $100 million program to offset some extra costs from the February price spike on heating bills of low-income customers. Long said LIHEAP subsidies won’t do enough to cover the massive bills left by the energy crisis.
Right now, the legislation says it will be paid for by state money. But Long said he and fellow lawmakers want to tap into federal COVID-19 relief money in the stimulus bill to fund the effort since so many power customers are struggling to pay bills during the pandemic. The state government is expected to receive about $2.6 billion from the American Rescue Plan, and Long said he hopes to use money from more general funds sent to the state rather than cash associated with the LIHEAP program.
In an interview Wednesday, Senjem said the $100 million figure was based on data of low-income customers compiled by the PUC. The Rochester Republican said he was still worried about people who don’t quite qualify as low-income under the program, but said the price spike is an “emergency not unlike the COVID emergencies.”
“We’ve got some people here that have enough problems with meeting the daily expenses anyway and a substantive hit on their gas bill like this is probably something they’re not going to be able to handle,” Senjem said.
The Legislature may opt for a different solution to the price hike problem, Senjem said. And he said the $115 million price tag of the bill is large enough to warrant careful consideration. But he said lawmakers can’t “hide” from the problem and need to have a conversation about helping people most in need of subsidies for heat bills.
In a sign of bipartisan support for the legislation, Long’s bill was advanced by his committee on a 15-to-1 vote Wednesday evening. It is now headed to the House Ways and Means Committee.
The bill is also supported by the major private natural gas utilities Xcel Energy and CenterPoint, as well as the association representing municipal utilities.
In a statement, CenterPoint spokesman Ross Corson said the company “strongly supports this legislative effort to provide relief to utility customers due to the unprecedented natural gas price spikes experienced last month, and we believe this bill provides a framework that can deliver that needed relief.”
Power consumer advocates, including the Citizens Utility Board, are also in favor of the bill. Annie Levenson-Falk, CUB’s executive director, testified however that legislators should consider giving struggling businesses some financial help as well if there’s enough money to do so.
In the current bill, if any price-gouging investigation leads to a settlement or legal penalties, the money would also be dedicated to paying the costs of the program. Levenson-Falk said any such cash should be distributed to people at all income levels who were affected.
Sieben, the PUC chairwoman, urged lawmakers to pass the bill. “We’re very supportive of making this legislation work and are supportive of any targeted relief the state is able to provide to help lessen the impact of this unprecedented event,” Sieben said.