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CenterPoint’s Tiered-Pricing Gets Shelved

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ST. PAUL, Minn. (WCCO) – It’s been in the works for little more than one heating season but a controversial natural gas pricing program is already being suspended.

CenterPoint Energy’s inverted block rate program was intended to encourage energy conservation by charging higher rates for the highest consumers.

Even though it was meant to do good, tiered pricing became the target of criticism.

Like most Minnesotans, Nina Coocharelli isn’t looking forward to the part of winter that puts a pain in her wallet. She does what she can to reduce high heating bills, such as putting plastic over drafty windows.

“Heating your apartment or your home can be really expensive and I’m sure that’s probably everyone’s main concern come wintertime,” said Coocharelli.

So to encourage customers like her to use less natural gas, CenterPoint Energy initiated tiered pricing in January 2010. The basic idea behind the pilot program known as “inverted block rate pricing,” was to give consumers an economic incentive to conserve. The higher a customer’s gas consumption, the higher their cost per therm (BTU) used.

But the program also had its critics, including Minnesota’s Attorney General Lori Swanson.

“I don’t know of anyone who leaves the heat on high just for fun,” she said.

Swanson, along with the Minnesota Department of Commerce, filed written objections to the pricing program with the state’s Public Utilities Commission. Both believe the pricing structure, while intended to promote gas conservation, was having unintended consequences which were costing Minnesota consumers lots of money.

They argued that the program was pushing up gas bills for the elderly, especially those with medical conditions who required higher home temperatures. People living in multi-unit buildings serviced by a single gas meter were also disadvantaged and had no control over gas consumption.

The attorney general points out that the unemployed were also being adversely affected.

“Those with bigger families who maybe work from home, unemployed people who are home and couldn’t turn the heat down when they went to work because they don’t have a job,” said Swanson. “It affected people who live in drafty homes, people who, in the bad economy, couldn’t afford to do a lot of energy upgrades.”

CenterPoint said it will re-evaluate the program and isn’t giving up on ways to encourage conservation.

“Those original reasons were to do exactly that, and that was to incent customers to conserve energy. But also to reduce rates for low use customers, which are typically our low-income customers,” said CenterPoint’s Rebecca Virden.

Reverting back to a flat-rate pricing structure for the 2011-12 heating season will likely push Coocharelli’s bills a bit higher.

Meantime, those in larger homes and unable or unwilling to turn down the thermostat will get a temporary break on the price of the natural gas they use.

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