Gas bills could change this winter after 'tiered pricing' ends

Did you get slapped with higher gas bills last winter for keeping your drafty, four-bedroom house at a constant 70 degrees?

Residents who saw their gas bills rise under CenterPoint Energy's tiered pricing system will likely get some relief this winter as the pricing system is suspended to address concerns over fairness.

The rate structure that took effect in July 2010 was designed to encourage customers to conserve energy by charging higher rates to those who used more energy. Customers paid for their gas use at five different rates, depending on how much they used during a month. If the total exceeded the various thresholds, higher rates kicked in.

To see an example of how inverted block rate pricing structure works, see a sample bill provided by CenterPoint Energy.

But the pricing system, a pilot program affecting about 780,000 residential and commercial customers statewide, ended up hurting some residents who claimed they needed to use more heat through no fault of their own.

That included people living in multi-family buildings with only one gas meter, people with medical conditions or elderly residents who stay home during the day, and people who said they had already exhausted all options in terms of weatherizing their homes and replacing inefficient furnaces.

Attorney General Lori Swanson in June called on the state Public Utilities Commission to suspend the program after her office received complaints from consumers. CenterPoint agreed to work to address the concerns, and the PUC on Wednesday voted unanimously to approve a suspension of the program.

CenterPoint spokeswoman Becca Virden said customers who were part of the pilot program will begin to see their bills change back to the flat rate system in mid- to late October.

The change means customers who saw higher bills last winter due to tiered pricing will likely see their bills drop this winter. According to Swanson, about 140,000 customers in the program had higher bills in the last year than under flat-rate pricing.

But it's also likely that some customers who saved money through tiered pricing by keeping their usage low could see their bills go up under the flat-rate system.

The big question is who will be affected by the change and how.

"One reason some groups supported this program is because there was a price break for low users, including people with low incomes. We're now going to go back and see, did it do that, and what was the overall impact on the customers," CenterPoint spokeswoman Becca Virden said.

Virden said CenterPoint will lead a group to come up with recommendations on how to address concerns raised by the Attorney General. The PUC gave the group until March 1 to come up with recommendations.

Virden said the goal will be to improve the tiered pricing system — not get rid of it entirely. Environmental groups and at least one coalition representing low-income energy consumers were disappointed the program had to be suspended, but they said they're hopeful the working group will recommend keeping the tiered pricing system.

"We think that there are solutions we can adopt to preserve a pricing system that gives price signals to customers to pursue conservation," said Beth Goodpaster, clean energy program director for the Minnesota Center for Environmental Advocacy.

Pam Marshall, executive director of the Energy CENTS Coalition that represents low-income households, said that although the Attorney General cited complaints from low-income customers, most low-income customers in the program benefited from lower bills because they used less energy.

"For our constituency, lower use customers who are overwhelmingly low- and fixed-income customers actually get a discount under the tiered pricing structure," she said. "They would not get that under a flat rate."

Marshall said she's concerned officials are giving the complaints of a relatively small group of customers too much weight.

"It would be very unfortunate to throw out a progressive rate structure based on customer complaints, most of which are coming from people who are purely complaining out of their own economic self-interest," she said.

But not everyone agrees that most low-income residents save money through the tiered pricing system. William Davis, president and CEO of Community Action Minneapolis, said he's convinced that tiered pricing structure is costing low-income households in Minneapolis more.

"It's difficult for people to actually maintain a reasonable temperature in their household at 40 therms," Davis said, referring to a monthly usage that would allow a CenterPoint customer to avoid the top three tiers of the pricing structure. "Most customers we deal with live in drafty homes, homes that are not well insulated."

In addition, Davis said, the tiered pricing program came at a bad time — more and more people were being laid off, causing them to spend more time at home and therefore use more heat.

While no customers told the PUC they like the tiered pricing structure, Marshall said she hopes customers who benefited from it might become more vocal after this winter — especially if their bills go up.

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