Nicor refunds long overdue
October 4, 2009—Consumers don’t have a lot of faith in big corporations these days—and with good reason. Practically every week we hear of a new scheme designed to bilk consumers out of their hard-earned money. But the latest scam—worth $287 million—is particularly disturbing, because it happened in our own backyard, with Nicor Gas.
It’s a sordid tale that has all the earmarks of a classic corporate scandal: a company whistleblower spilling the beans, utility officials misleading regulators and misstating earnings, two separate federal investigations, fines, firings and even secret tapes of gas traders.
But, unlike recent corporate scandals, this one could have a happy ending for consumers.
At CUB’s urging the Illinois Commerce Commission (ICC) has reopened an investigation into Nicor’s misdeeds and all the independent parties who’ve reviewed the facts—CUB, the Illinois Attorney General’s office, and even the ICC’s own staff—agree the company’s actions cost consumers a bundle.
The scandal itself dates back to 1999, when the ICC, over CUB’s objections, loosened regulations over Nicor’s gas prices. The company claimed the plan would give it incentives to purchase cheaper gas for customers because if prices fell below a set benchmark, Nicor got to keep half the profits.
We had a bad feeling about the deal from the start—the potential for monkey business was just too great. We predicted it would lead to higher, not lower, bills for consumers and we were right. Then, in 2002, a company whistleblower sent CUB an anonymous fax detailing how Nicor had actually designed the plan from the start to cheat customers and profit from very cheap gas it had in storage for decades.
Absent the “incentive” scheme, that gas could have been used to offset the sky-high winter prices consumers were paying. But under the new rate plan, a hefty chunk of the value was pocketed by Nicor as “profits.”
Exactly how much was the question.
When CUB’s experts first looked at the evidence, we concluded the overcharges—and refunds due consumers—topped $190 million. But after including interest and reviewing new evidence, including testimony from a dozen current and former Nicor officials and over 140,000 company documents, we now know the company’s money-grab cost consumers at least $287 million.
CUB has been doing its part over the last seven years to force Nicor to pay up but the case got sidetracked by legal wrangling over the secret tapes and other delays. However, now we see the light at the end of tunnel.
Nicor continues to insist it did nothing wrong, despite paying a $10 million fine to settle a Securities and Exchange Commission (SEC) suit and acknowledging that company employees “may have engaged in potentially fraudulent conduct.” In fact, the utility claims customers actually owe it $6 million.
That may be the biggest insult of all. But what can you expect from a company that seems to have been caught red-handed lying to regulators and cheating consumers? Nicor customers deserve a big, fat apology along with their refund. But they won’t hold their breath waiting for it.