Report: Even With Excessive Profits, Gas Utilities Still Hike Rates

For utility customers, the result has been a steady uptick in the cost of natural gas delivery, which has cut into savings from historically low natural gas prices.

In Texas, gas utilities already reporting excessive profits frequently seek permission to charge their customers even more.

But rather than rejecting those requests outright, regulators often green light them with almost no questions asked.

That dramatic finding, included in recent reports by the Houston Chronicle, raises new questions about the fairness of a controversial program at the Texas Railroad Commission known as the Gas Reliability Infrastructure Program.  Under it, gas utilities regularly seek and receive permission to hike rates — but without first proving the prudence of their expenditures.

Reporter Ryan Handy

Reporter Ryan Handy examined GRIP cases going back about 10 years, comparing the outcomes in those cases with rate-of-return profit levels also reported by the utilities. She focused on GRIP cases filed by two of the state’s largest gas monopolies: CenterPoint Energy serving Houston and Beaumont, and Atmos serving North, Central and West Texas.

She found that “Atmos earned above the allowable level in 2013 and 2015 … and both times the Railroad Commission allowed the company to raise rates with few questions asked.”  A similar pattern emerged for CenterPoint. The Texas Railroad Commission authorized three GRIP increases during just four years for divisions of that utility, even though they were reporting higher-than-authorized rates of return.

“For the company’s 1 million Houston-area customers, the result has been a steady uptick in the cost of natural gas delivery, which has cut into savings from the lowest natural gas prices in nearly two decades,” reported Handy.

Because gas utilities are public monopolies, it’s the job of regulators to ensure they do not over charge customers.  During traditional rate reviews the Texas Railroad Commission will consider utility operating and capital costs, and it also will authorize a “rate of return” for company investors.

But in GRIP proceedings, the agency considers only infrastructure expenditures, without consideration of off-setting revenue increases or utility savings that could eliminate the need for rate hikes. Neither can city groups or ratepayer organizations challenge the prudence of utility expenditures during the GRIP process.

As a consequence, GRIP  has come under fire from consumer groups and others, who say it has led to frequent and unwarranted rate hikes. The Atmos Cities Steering Committee has called for the elimination or reform of the GRIP program, which was created by statute.

Handy also examined electric transmission and distribution cases, which are overseen by the Texas Public Utility Commission. She reported that the PUC has closely monitored the earnings of Centerpoint’s electric utility, and even clawed back nearly $70 million in excess profits for customers in 2005.

“Inconsistencies in regulatory policy are quite evident,” said Geoffrey Gay, an Austin lawyer who serves as general counsel for the Atmos Cities Steering Committee and other city coalitions. “There are just too few cases that come to the Railroad Commission. They are not handled as carefully as they would be (at the PUC).”

Handy’s report appeared in the May 31 edition of the newspaper. She also authored a June 2 follow-up article. They can be found here and here.

For more about the GRIP program, check out this 2010 report from the Atmos Cities Steering Committee.

— R.A. Dyer