A $287 million fraud
Sept. 22, 2009 — Nicor Gas owes customers a $287 million refund for defrauding them just as they got slammed with record-high heating prices, according to expert analysis in a case that CUB kept alive through years of legal delays.
The case, which is heating up just as CUB fights nearly $1 billion in rate-hike cases statewide, is the second gas scandal the consumer group has uncovered this decade. In 2006, Peoples Gas gave its customers a record $100 million refund after CUB found evidence of an improper deal with an Enron affiliate.
The Nicor refund, proposed by CUB this past August in testimony filed with state regulators, would set a new record for gas customers and help protect consumers across Illinois.
“Nicor has been caught misleading the commission and cheating customers,” said CUB Board President Robert Craig Neff, of Northbrook. “Consumers deserve a big refund that will make it clear to all Illinois utilities that this kind of abuse won’t be tolerated.”
The Illinois Commerce Commission (ICC) is investigating whether Nicor wrongly profited at the expense of customers from 2000 to 2002. The utility then operated under the more lax regulation of a “Performance Based Rate” (PBR) plan, supposedly designed to encourage it to buy gas at lower prices.
Seven years ago, an anonymous Nicor whistle-blower faxed CUB a 14-page memo outlining how Nicor hatched a scheme to use the plan to overcharge its customers and hide its ill-gotten gains from the ICC. State regulators had first approved the plan in 1999, over CUB’s objections, and the memo confirmed CUB’s concerns.
Under the plan, Nicor’s gas prices were tied to a benchmark and if the company was able to buy gas below the benchmark, it shared half of the savings with consumers.
Sparked by the memo, CUB experts reviewed 140,000 Nicor documents and interviewed a dozen company officials. The evidence shows how Nicor used the PBR plan to conceal how it manipulated gas in storage to profit while its customers suffered under record-high heating prices. That storage gas should have been used to give customers some relief from skyrocketing prices. Instead, it was manipulated to boost Nicor profits.
CUB’s evidence is boosted by the fact that Nicor has already agreed to a $10 million settlement after the Securities and Exchange Commission charged it with defrauding investors. Nicor itself has said that personnel “may have engaged in potentially fraudulent conduct” in connection with the “PBR” plan.
The case has been delayed since 2004, after Nicor revealed that a trading partner had recorded telephone conversations with company officials involved in gas purchases. CUB’s request to listen to the tapes to build a better case against Nicor sparked disputes and delays.
CUB hopes the case will be decided next year.
Please give to CUB's consumer-defense fund to help us fight for a big refund from Nicor Gas.