Fighting the Peoples/North Shore Rate Hike
On Nov. 3, a state regulatory judge recommended that Peoples Gas get an increase of about $57.4 million and North Shore get about $1.5 million. CUB wants even deeper cuts. A final decision by the full Illinois Commerce Commission (ICC) is expected in January 2012.
Background
Peoples and North Shore asked for the increase in February of this year, only 13 months after the company was granted an increase of about $70 million. Since 2007, Peoples has received about $140 million in higher rates.
The rate hike would hit customers with roughly $100 a year in extra costs. North Shore Gas’ request would hit its customers with roughly $35 a year in extra costs.
These "delivery" rate hikes would increase what the companies charge to deliver gas to homes. Those charges take up about a third of a gas bill. The other two-thirds, roughly, is taken up by the price of the actual gas.
What CUB Says
CUB co-sponsored several witnesses with the Ilinois Attorney General’s office and the City of Chicago. CUB Director of Policy Chris Thomas testified that although the companies wanted a return on equity, or authorized profit rate for shareholders, of 10.85 percent, they really deserve as little as 7.09 percent. That would help slash Peoples’ proposed rate increase by as much as $81.6 million and wipe out the North Shore Gas increase.
Scott Rubin, a Pennsylvania-based consultant who focuses on public utility issues, argued that the rates proposed by the companies are highly discriminatory against low-use residential customers. Peoples has proposed increasing the customer charge by 45 percent, from $19.50 to $28.21 a month. North Shore’s charge would jump 39 percent, from $17.80 to $24.75 a month.
That monthly fee is what customers pay just to have gas service, before they even use a therm of heating fuel, so energy efficiency efforts can’t help lessen the pain of that charge.
Talking Points
Peoples Gas is proposing to sock customers with roughly $100 a year in extra costs. North Shore's proposed increase would hit customers up for another $35 a year. The companies have horrible timing, asking for a rate increase that would hit in the heart of the winter heating season, during a struggling economy.
This is the third rate hike the company has asked for since 2007. Peoples Gas has raked in $140 million in higher rates during that time. Plus, its parent company made $221 million last year, and on Nov. 2 announced that its $39.6 million in third-quarter profits was an increase of 81 percent from the third quarter 2010. In the middle of an economic downturn, Peoples just can't justify a $120 million pay raise.
Peoples and North Shore say they need this increase, but experts for consumer advocates tell a different story. The facts show that Peoples and North Shore have no business asking for a $120 million rate hike. In fact, at best the companies can only justify a fraction of that.
The companies are asking for an exorbitant return on equity, or authorized profit rate for shareholders, of 10.85 percent. Who wouldn't love to get that kind of return on a savings bond? In this economy, consumer advocates argue that a return as low as 7.09 percent would be reasonable.
Also, the company is proposing a punishing 45 percent jump in the customer charge. Peoples wants its customers to pay more than $28 a month, before they even use one therm of gas. And that’s a fixed monthly fee, so no matter how energy efficient we are we won’t be able to lessen the pain of that exorbitant increase.
Take Action
Help CUB fight the rate hike by filing an online comment with state regulators. (The comment can be as simple as “No Peoples increase!”) Use docket number 11-0281 to comment on Peoples' proposed rate hike and 11-0280 to comment on North Shore's request. Or you can call the ICC at 1-800-524-0795.
Also, please give to CUB's consumer-defense fund to help us fight $1 billion in potential rate hikes for Illinois consumers.
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