CenterPoint, City of Houston reach agreement on delivery rate increase slated to take effect March 1

The Houston City Council last month denied a proposed 57% increase to CenterPoint’s delivery rate for electricity, but the parties subsequently negotiated a smaller increase. Additional hikes could be coming in the months ahead because of a new Texas law that allows utility companies to make more rate increases per year.

Power Lines
David J. Phillip/AP
Shown are power lines near Houston on Feb. 16, 2021.

Starting in March, Houston-area residents and businesses likely will see a spike in their monthly electricity bills.

CenterPoint Energy, which provides power transmission and distribution services to about 1 million customers in the region, wrote this week in a filing with the Public Utility Commission of Texas (PUCT) that it had reached an agreement with the commission, the City of Houston and others regarding a proposed increase to its delivery rate. The company had asked the city and state agency to approve a 57% increase – meaning the charge for an average customer would increase from $2.67 to $4.20 per month – but the Houston City Council denied the application late last month.

Citing capital investments it has made since 2019 to bolster system resiliency and replace aging infrastructure – such as installing new concrete and steel utility poles that have been met with mixed reviews among the public – CenterPoint originally proposed to increase its Distribution Cost Recovery Factor (DCRF) by $85.9 million to a total of $233.5 million.

According to the agreement outlined in Monday's filing, which is slated to take effect March 1 but has yet to be approved by PUCT, that latter revenue figure will be set at nearly $220.5 million, meaning the city negotiated a decrease of about $13 million compared to the original proposal.

Still, the proposed rate change represents a significant cost increase to customers, according to Sandra Haverlah, president of the Texas Consumer Association. CenterPoint supplies electricity to about 900,000 residential customers in the region.

"I think people are tired of paying higher bills under the guise that somehow we're making the system more reliable," Haverlah said, referring to Texas' power grid as a whole. "The system as it stands today is not significantly more reliable than it was four or five years ago."

According to the city council agenda item ahead of its Jan. 31 vote against CenterPoint's original proposal, which was filed Dec. 14, the denial was recommended because the state's new 60-day window to evaluate the request was not enough time and because CenterPoint had implemented another rate increase in September. Senate Bill 1015, a new Texas law that took effect in September, created the 60-day window and also allows utility providers such as CenterPoint to submit DCRF requests twice per year instead of once per year.

A spokesperson for the city's Administration & Regulatory Affairs Department, which recommended that the city council deny the original request, also said putting the matter in the hands of the state agency, which concurrently received the application, would streamline the process and ultimately save taxpayer money.

"Settlements in contested proceedings work to the benefit of ratepayers because they result in lower litigation costs than a protracted litigation process," the department said in a statement. "More significantly, in the absence of a settlement, there is a risk to ratepayers that the commission will award a utility the full amount of the requested increase."

In a Jan. 24 filing with PUCT, attorneys for the city noted that CenterPoint had increased its DCRF revenue requirement by about $147.5 million in April 2023 and also claimed the energy company was trying to recover costs in its more recent proposal that should be covered in other rate adjustments. The city recommended that CenterPoint reduce its newer proposal by about $20.6 million, and the agreed-upon reduction ended up being about $13 million.

"CenterPoint Energy continues to invest in our electric distribution system with system improvement, load growth and intelligent grid projects," the company said in a statement Tuesday. "This vital work helps ensure we can provide safe and reliable service to our customers in southeast Texas."

Haverlah, with the Austin-based consumer advocacy group, criticized the new Texas law that allowed CenterPoint to make a second DCRF request in 2023, adding that other utility providers across the state have similarly taken advantage. She also said it's likely that Houston-area electricity users could be subject to another rate increase in the coming months.

She said she thinks the City of Houston did about as much as it could to curb the most recent rate increase, adding that PUCT will typically "approve what's put in front of them" and community members have limited means to push back against such hikes.

"The reason legislators were given (to support Senate Bill 1015) is that infrastructure needs money," Haverlah said. "That's understandable. Infrastructure does need money. But the amount of money these companies are making is also very high. They never lose money. They make millions of dollars every year, and with the new law since September, there are no checks and balances."