The surge in demand for natural gas that occurred last month during a nearly nationwide cold weather event drove up costs for many municipal shops in the state past the point of affordability.
Speaking to state senators during a virtual committee hearing Thursday, March 18, Kent Sulem of Minnesota Municipal Utilities Association said members of the municipal heating and power sector "are seeing the consistent hit from the daily rate surge that occurred."
Seeking to offset their costs, some Minnesota legislators are proposing that the state spare $15 million from its general fund for municipal utilities to borrow. They do as the Minnesota Public Utilities Commission continues to investigate how the price spike will affect consumers.
Representatives of the state's largest publicly traded utilities told members of the commission last month that the episode could result in costs of several hundred dollars being passed on to their customers. Demand for power and heat soared as temperatures plunged mid-February, they said, draining reserves of natural gas and forcing utilities to purchase more of it on the spot market, where it traded at exorbitant prices. Extreme cold nearly froze gas plants across the South solid, halting production and further dampening supplies.
RELATED: Though power grid held steady during cold, Minnesotans brace for natural gas price surge
For municipal utilities, the price surge has been no less challenging. Kris Manderfeld said during a Senate Committee on Energy and Utilities Finance and Policy hearing Thursday that the city of New Ulm's utility, of which she is the director, recently received a $7.5 million bill from its natural gas supplier for the month of February.
According to Manderfeld, the city of 13,500 had been billed the month before for just $727,000.
"That's a huge increase in the cost of natural gas for one month," she said.
Unlike their larger, investor-owned counterparts, municipal utilities would not be bound to recoup their costs only by spreading them out of an annual billing cycle.
Any of the weather-related costs incurred by the customers of Minnesota's larger, investor-owned utilities would be spread out over the course of the billing year that begins in September. But municipal utilities, which are regulated locally, could move to recoup their costs in such a fashion now.
Some have already begun to do so and more could join them as gas suppliers come to collect at least part of what they are owed.
"I haven't heard of any supplier at this point yet who has said 'I need every dollar you owe me and I need it now," Minnesota Municipal Utilities Association CEO Jack Kegel said at Thursday's hearing, "They're trying to work with them. But obviously the pressure is on the cities to come up with as much money as they can and a plan for the rest."
Adding to that pressure is a packed schedule faced by the Minnesota Legislature, whose session for the year ends May 17. Lawmakers introduced bills for the municipal utility loan program just this week and have already begun to shepherd it through House and Senate committee approval processes.
If approved, the legislation would see the State Department of Commerce decide the amount of money to lend a municipal utility. A funding formula included in the legislation would determine the maximum amount of money each for which a utility could apply.
The commerce department would also be tasked with drawing up a program that low-income households in Minnesota could apply to for assistance with bills related to the price spike. A version of the legislation introduced in the Senate would have appropriated $100 million from the state's general fund for that program but was stricken at the request of its author, Sen. David Senjem.
According to Senjem, R-Rochester, lawmakers need to discuss a funding amount for the assistance program in greater detail.
"That number will find itself at some point," he said.
The state Senate version of the legislation was approved by the utilities committee and referred to the chamber's committee on finance. A House committee approved a counterpart to the bill earlier this week and sent it to another committee there for further review.
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March 19, 2021 at 08:03AM
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Minnesota lawmakers weigh relief for municipal utilities and low-income residents - Pine Journal
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