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CenterPoint Energy, Inc. (CNP - Analyst Report) won approval from the Mississippi Public Service Commission for natural gas rate hike, effective immediately. The substantial mismatch between the company’s actual investment returns from modernization initiatives and allowed return drove the increase in the natural gas rate.

Per this year’s rate adjustments, it was found that CenterPoint’s returns were much less than its investments, resulting in the rate hike. Per the new rates, the company’s residential and small commercial customers will now have to pay an extra $1.58 and $4.00 on monthly bills, respectively.

As a result of this rate increase, the minimum charge for residential customers will be $10.55 per month, up nearly 8% from $9.77. The Mississippi customers will pay 13.2 cents, up 17.8% for every 100 cubic feet of natural gas supplied for pipeline maintenance and to recoup overhead expenses.

To recuperate the cost of natural gas, additional charges included will bring the average monthly residential bill to around $34 with the average base bill rising 11% to $15.83 from $14.25.

For small commercial customers the total bill will climb to $15.09 from $13.20 with the average base bill before additional charges climbing 10.8% to $40.75. This entails customers to shell out 21 cents per 100 cubic feet reflecting an increase of 1.7 cents.

CenterPoint expects the positive rate changes to increase revenues by $2.9 million and has also agreed to utilize 55% of its asset management charges to cut gas costs by $2 million.

The company continues with its strategic investments to strengthen its infrastructure. CenterPoint Energy plans to make investments of $6.8 billion between 2013 and 2017 for maintenance and upgrade of its assets.

However, the company’s modernization efforts will be put to test given the violent hurricanes predicted to hit operations in CenterPoint’s service areas in the coastal regions. This along with a still fragile U.S economy will continue to act as a deterrent for the company.

At the moment CenterPoint Energy has a Zacks Rank #4 (Sell). However, other utilities currently looking well positioned in the industry are Zacks Ranked #2 (Buy) DTE Energy Company (DTE - Analyst Report), Entergy Corp. (ETR - Analyst Report) and Calpine Corp. (CPN - Snapshot Report).

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