ST. PAUL — State lawmakers are toying with the idea of lending millions of dollars in zero-interest loans to the municipally owned utility companies in Minnesota that were hammered by a recent spike in natural gas prices.
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.
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.
Any of the weather-related costs incurred by customers of Minnesota's larger, investor-owned utilities would likely 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, though according to Minnesota Municipal Utilities Association CEO Jack Kegel they are trying to be accommodable.
"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," 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 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, that dollar amount was more of a starting point.
"I do this simply because we don't know exactly where this number is right now," he said during the hearing. "That number will find itself at some point. This was a number put in there with some degree of speculation and I'm not sure it offers much at this point."
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.