By Mike Hughlett

When a deep freeze hit the South in February, the natural gas market essentially failed Minnesotans, leaving them on the hook for an unprecedented $800 million in extra charges.

Under state law, utilities pass down wholesale gas costs, which skyrocketed in February. Many Minnesota consumers will pony up at least 50% more than they pay annually for their heating bills.

Customers of CenterPoint Energy, the state’s largest gas utility, will be hit the hardest: $354 for the average residential household. The state’s second- and third-largest gas utilities, Xcel Energy and MERC, expect surcharges of $270 and between $225 to $250, respectively.

“The [surcharge] is not acceptable, and I have a lot of anger about this,” Katie Sieben, chairwoman of the Minnesota Public Utilities Commission (PUC), said at a recent meeting.

The huge tab is rooted in failures in gas-producing regions like Texas, where temperatures plunged and equipment froze. Supply cratered just as demand soared.

But the gas-supply plans of utilities in Minnesota and many other states also came up short during the crisis.

The Northern Natural Gas pipeline is the state’s primary gas conduit, delivering the commodity from Texas, New Mexico, Oklahoma and Kansas. Canadian natural gas is also shipped to Minnesota, notably through the Viking and Great Lakes pipelines. Natural gas destined for Minnesota is bought and sold primarily at three trading hubs.

The system did not work, PUC Commissioner Joe Sullivan said at the same meeting.

“It’s pretty binary, and it is very frustrating,” he said. “We are going to the Legislature and asking for a lot of money for ratepayers and it is very painful.”

That legislation is pending amid calls for spending $100 million to help low-income gas customers cover the charges.

Along with the state’s gas utilities, the PUC is on the hot seat to prevent such a fiasco from recurring.

“It is their job more than anybody’s,” said Ryan Kellogg, professor at the University of Chicago’s Energy Policy Institute. “They are ultimately accountable.”

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Areas of Focus: Energy Markets
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Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Fossil Fuels
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Fossil Fuels
Under current policies, fossil fuels will play an important role in the energy system for the foreseeable future. EPIC research is exploring the costs and benefits of these fuels as...