Though power grid held steady during cold, Minnesotans brace for natural gas price surge
The surge in natural gas demands and the resulting spike in prices may be passed on to utility customers in Minnesota. Some could be charged hundreds of dollars more in utility bills, costs that would be spread out over the course of next year.
ST. PAUL — The electrical grid in Minnesota largely withstood the punishingly cold weather that enveloped the state in recent weeks, unlike the grid in Texas, where winter storms last week caused widespread blackouts.
But the surge in natural gas demands, both for heat and for power, and the resulting spike in prices may be passed on to utility customers in Minnesota. Some could be charged hundreds of dollars more in utility bills because of it, regulators were told this week, costs that would be spread out over the course of next year.
"I think what the event has shown of the last week," Public Utilities Commission member Joseph Sullivan said Tuesday, Feb. 23, "is that our system is resilient from a reliability perspective, but my concern is that from an economic perspective, we are vulnerable."
The state utilities commission met Tuesday with Minnesota's largest natural gas utilities for a virtual meeting on the price spike. As temperatures plunged nationwide and the demand for power generation and heating soared, commissioners were told, Minnesota utilities kept pace by purchasing outsized volumes of natural gas on the spot market, where prices exceeded 50 times their normal average between Feb. 12 and 17.
Further exacerbating the price spike was the winter weather that blanketed the South, which stalled the production of natural gas at processing plants.
Unlike the cold weather spell that struck Minnesota in January 2019, utility officials said Tuesday, the temperatures observed in recent weeks caused only a few disruptions, primarily affecting customers under what are called "interruptible" contracts. Such arrangements, according to the U.S. Energy Information Administration, allow for lower electricity or natural gas rates.
In exchange, utilities can, with little notice, ask interruptible customers to curtail their consumption or cut them off from power completely in order to meet the demands of higher priority users.
Minnesota's power infrastructure rose to the cold weather challenges of late in part because it was designed to do so — many pipelines in the state are insulated and many of its wind turbines use more weather-resistant lubricants. It is also tied into a larger, regional grid that serves much of the Midwest and stretches from Canada into the South.
States served by that system, overseen by the Midcontinent Independent System Operator, a nonprofit organization, can leverage each other's power generating capabilities when struggling or failing to meet their own power demands. Texas, by contrast, is served for the most part by a grid that doesn't extend beyond its own borders, and makes little use of weatherization practices due to its historically warmer weather.
"We are much more connected, and moreover I think we are in a much better shape to handle this cold weather," Ned Mohan, a professor of power electronics and systems at the University of Minnesota, said in an interview.
Not all Minnesotans were so fortunate, however, with some in the western part of the state losing power last week along with their neighbors in the Dakotas, all of whom are served by a separate regional grid.
And steady though their grid did hold, others Minnesotans may still have a heavy price to pay for their uninterrupted power and heating usage. Officials with CenterPoint Energy, the largest gas utility in the state, said during Tuesday's PUC meeting that recent events may increase their customers bills by $300 to $400 this next year.
Xcel Energy, Minnesota Energy Resources and Great Plains Natural Gas officials said they are anticipating similar increases of between $200 and $300 for their respective customers. Greater Minnesota Gas, a Faribault-based utility with a smaller customer base, does not expect such a price hike.
“We were able to keep our supply steady and we didn’t have to engage in spot gas purchasing,” Kristine Anderson, of Greater Minnesota Gas, told commissioners Tuesday.
Any rate increases would be spread out over the annual billing cycle beginning in September, or potentially for longer, and subject to PUC approval. The commission voted 5-0 Tuesday to investigate the impact of the surge in gas prices on utility customers.
That the commission is staying on top of still-developing issue bodes well, according to Annie Levenson-Falk, executive director of the Citizens Utility Board of Minnesota, a consumer advocacy group.
"If those costs get passed to customers in the usual manner, that’s going to be a really big impact on a lot of people" she said.
Contact Matthew Guerry at firstname.lastname@example.org or 651-321-4314