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Houston City Council is poised to reject a request from CenterPoint to raise natural gas bills by $5 per month as part of a statewide consolidation that would lower rates elsewhere.

City advisors say the company’s request would subsidize ratepayers in Beaumont without benefitting the residential customers in Houston who would see the biggest rate hikes. It also would give commercial customers a rate cut while increasing the cost for residential customers, they said.

City Council does not have the final say, however. If council members vote down CenterPoint’s request, the company will take its case to the Texas Railroad Commission, which regulates gas utilities in the state.

The company’s request threatens to add another monthly burden to Houston residents who already have seen recent water and electric bill hikes.

The dispute could be coming to a close, however. On Thursday, CenterPoint filed a notice with the state that it is nearing a settlement with Houston and other cities on undisclosed terms.

Raising rates

With 1.9 million customers, CenterPoint is one of the state’s largest natural gas providers. For decades, the utility has divided its gas operations into four regions.

One division contains Beaumont and much of East Texas, another covers cities close to the coast, such as Pearland and Sugar Land, a third covers South Texas cities, including Laredo and Victoria, while the fourth and most densely populated covers Houston and nearby areas.

Last October, the utility filed a request with the city and the Railroad Commission to merge all four divisions. CenterPoint says the consolidation would reflect the reality of how it manages its operations in Texas as one unit.

The company declined an interview request. In a statement, CenterPoint spokesperson Logan Anderson said the consolidation would improve “operational and administrative efficiency.”  The company says that raising rates will allow it to pay for investments such as gas meters with automatic shutoff valves that can respond to excess flow.

The main drawback for Houstonians is obvious: residential customers who pay an average of $43.62 per month would have to fork out $48.79. Customers in Sugar Land and Pearland would take a similar hit.

Customers in more sparsely populated divisions, who have long had to pay more because it costs more to provide them service, would come out winners. The average residential customer in Beaumont would see their bill drop more than $5 to $51.08 as the company harmonizes prices.

CenterPoint’s request to merge divisions across such a large part of the state is unprecedented, according to Railroad Commission staff. While other gas companies in Texas have consolidated divisions before, CenterPoint’s request “is the first of its kind and scale.”

“Until this case, none of the three largest investor-owned local distribution company gas utilities … have proposed to combine all its respective operating divisions to form a single set of state-wide rates,” the agency said in a statement. 

City skeptical

During a March 26 presentation to City Council, Mayor John Whitmire and council members grilled a CenterPoint executive about the plan. Several zeroed in on why Houston residents would see rate increases while other divisions would get lower bills.

“The company feels like being able to spread those costs over the wider customer base will in the long run reflect how we’re operating the system and achieve benefits for all our customers,” said Patrick Peters, the company’s vice president for regulatory services.

Pressed by District J Councilmember Edward Pollard whether that would translate into lower bills for Houston residents, Peters repeated that the consolidation would make the company more efficient.

“That’s a ‘no,’” Pollard said.

Mayor Pro Tem Martha Castex-Tatum noted that residents already are grappling with inflation and rate hikes for other utilities, including city water, which imposed a 9 percent average increase on April 1.

In filings with the Railroad Commission, the city’s utility consultants say the consolidation effectively would result in “enormous subsidies” from Houston residents to other parts of the state. Houston and coastal cities would be handing over $53 million to cover operations in the rest of the state, according to Mark Garrett, a former utility regulator in Oklahoma.

The city’s consultants noted, moreover, that residential and commercial customers would be treated differently under the proposal. Large commercial customers in Houston would see their bills drop by 18.5 percent.

Anderson, the CenterPoint spokesperson, said the company “has proposed to decrease the amount billed to most small and large commercial customers and increase the amount billed to residential customers in the current Houston and Texas Coast divisions, in order to more closely reflect their cost of natural gas service in a consolidated service area.”

The city’s advisors also took potshots at the company’s request to have ratepayers cover the cost of $1.5 million worth of severance payments to former executives.

The only efficiency the company has identified from consolidation is being able to file one instead of four regulatory filings, the advisors say.

City Council is set to vote Wednesday on whether to reject the company’s request to raise rates, as recommended by the city’s utility advisors.

That would kick the case over to the Railroad Commission, where CenterPoint already has an ongoing request.

The commission is expected to rule on the company’s request this summer – but not if the two sides can reach a settlement before then. In a filing with the commission Thursday, CenterPoint said it was close to reaching an agreement.

Houston’s consultants have proposed rate changes that would allow the company to consolidate divisions while shielding residents from significant rate hikes.

The company did not disclose details of the potential settlement. Alton Hall, an attorney with the firm Adams and Reese who represents Houston in the proceedings, declined to comment.

“We can’t get into details, because the settlement has not been finalized,” Hall said Friday.

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