INVERTED BLOCK RATES

Update: The Minnesota Public Utility Commission (MPUC) approved the multi-party proposal filed by CenterPoint Energy, Energy CENTS Coalition, Minnesota Center for Environmental Advocacy and the Izaak Walton League of America, to suspend the Inverted Block Rate program on Sept. 28. A work group will be convened to evaluate potential modifications to the program. At a minimum, the suspension will last into the spring of 2012.

This suspension impacts both residential and some commercial natural gas bills starting with meters read on or after October 14, 2011 and flat rate billing will be used instead. When compared to the Inverted Block Rate program, flat rate billing will raise winter bills for the lowest use customers and reduce rates for the highest use customers. 

The Inverted Block Rate program was initially implemented to encourage customers to conserve energy by sending price signals to high-use customers of natural gas and to provide a discount to low-use customers who are often low-income customers. However, the rate structure pilot prompted customer feedback and, in some cases, opposition. Because this pricing program was introduced as a pilot, MPUC has approved the suspension to allow time for the involved parties to review and modify the program. These modifications will address unintentional issues for affected customers, including customers with special medical needs and low-income, high-use customers.

Inverted Block Rate Background Information

The Inverted Block Rate structure, which began with July 2010 bills, resulted in residential and commercial customers using up to 5,000 therms a year paying a lower rate for the cost of gas if they conserved energy and used less natural gas. Upon implementation, CenterPoint Energy customer bills included an Inverted Block Rate (IBR) price structure that separated the cost of gas charge into five rate blocks based on natural gas usage. 

This rate structure also allows the company to adjust its rates once each year to recover or refund any difference between the cost of gas amount paid by customers under the inverted block rate structure and the company’s actual cost of gas.  This rate adjustment appeared on customer bills in 2011. For now, the IBR adjustment will remain as a line item on customers' bills until further notice.