Centerpoint takes heat: The attorney general said its tiered pricing structure is unfair to some customers

CenterPoint Energy is under fire from the Minnesota attorney general for an experimental pricing system that is supposed to encourage conservation by charging residential customers a higher rate as they use more natural gas.

Attorney General Lori Swanson said the program was launched last July with good intentions but has ended up "picking winners and losers ... for reasons that are unfair." She asked the Minnesota Public Utilities Commission (PUC) on Wednesday to suspend the three-year trial pending further study by the commission.

CenterPoint serves more than 715,000 residential customers, making it the largest natural gas supplier in Minnesota. The company has indicated that as many as 140,000 households may expect higher bills because of the pricing program.

The Legislature approved a law in 1983 authorizing "tiered natural gas pricing," also known as the "inverted block rate" program, Swanson said. But it didn't get off the ground until last summer, when CenterPoint agreed with regulators to try a five-tiered pricing strategy.

Gov. Mark Dayton recently signed a new law that will eliminate the tier-pricing structure after the experimental program ends.

Swanson, surrounded in her office by 20 consumers who have complained about the program, said it should be halted now. The program has had "unintended ramifications" for many, she said, including the home-bound, senior citizens, retirees, the sick, the poor and people with larger families or young children at home. CenterPoint spokeswoman Rebecca Virden said the program was designed "to send price signals to incent customers for energy conservation."

But Swanson noted that "you can only incentivize people's behavior if they can do something about it." Many CenterPoint consumers were forced to pay higher rates despite the fact that they've taken all reasonable steps to be energy-efficient given their health, family situations or financial constraints, she said.

In addition, Swanson said, some consumers were artificially pushed into higher rates because CenterPoint increased the length of its billing cycles beyond 30 days, jacking up the amount of heat they used in those cycles. The company sent out about 1.6 million bills exceeding 30 days, 45,000 of which exceeded 35 days, she said.

Swanson asked the PUC to require the company to make refunds to ratepayers who were charged more due to the company's use of longer billing cycles.

CenterPoint will review the attorney general's comments about the program and will respond at the PUC's website, Virden said. "We will follow the regulatory process," she said.

Replies to the attorney general's comments are due by June 21, PUC spokesman Dan Wolf said. After that, he said, it generally takes at least 60 days for the staff and commissioners to review the comments. So the PUC is unlikely to take action on the matter until at least mid-August. A hearing has not yet been set on the matter, Wolf said.

If the tiered-rate structure is suspended, the company would go back to billing customers the "true cost" that the company paid to acquire the gas.

Swanson introduced several disgruntled consumers at her news conference, and her 36-page comment to the commission contained vignettes from many others.

Jack Ross, 84, of Lakeland, Minn., said he and his wife of 45 years, Marjorie, each have cancer, and he also has arthritis. The World War II veteran lives on a fixed income and said he "complained bitterly" to CenterPoint when he heard about the program. His December gas bill covered 39 days, and his energy usage pushed him into the top pricing tier, meaning he paid nearly double what those in the lowest tier paid per unit of energy.

Swanson estimated that the Rosses paid $164 more for gas last winter than they would have paid under old flat-rate structure.

Lloyd and Carol White of Minneapolis said they have to keep their house about 72 degrees during the day because Carol, 73, a piano teacher, has Raynaud's disease. The disease affects circulation in the fingers, toes, nose and ears, which can go numb in response to cold and stress, and can even lead to gangrenous infections.

The Whites paid about $191 more for gas last winter than they would have under the flat-rate structure, Swanson said.