(800) 669-5556

Blog

Q&A on ICC gas rulings and how they impact customers 

The Illinois Commerce Commission (ICC) issued separate rulings in November that reduced record rate hikes proposed by Illinois’ major gas utilities by $240million, while also blocking most spending on a controversial pipeline-replacement program that has fueled a heating-affordability crisis for consumers in recent years. The ICC rulings also ordered the creation of a discount rate for lower-income customers and ordered the gas utilities to be part of a process to start planning for Illinois moving away from fossil fuels, such as gas, in the decades to come. 

While CUB doesn’t like to see bills go up a penny at the hands of utilities that are rolling in profits, we’re encouraged that for the first time in a long time the gas companies got much less than what they wanted. In an editorial praising the ICC for standing up for gas customers, the Chicago Sun-Times wrote: The amount of extra cash Illinois’ natural gas companies wanted to pipe in from customers’ wallets was cranked back significantly…That’s good news for people struggling to pay bills…It also helps Illinois pursue its goal of transitioning to a greater use of renewable energy.” 

This Q&A is designed to give you background on the gas ruling. 

How did the ICC rule on the proposed gas rate hikes? 

In January 2023, four Illinois utilities proposed a record $812 million in rate hikes: Nicor Gas (2.2 million total customers), Peoples Gas (840,000 customers), Ameren Illinois (816,000 customers) and North Shore Gas (165,000 customers. On Nov. 16, after 11-month rate cases in which CUB and other consumer advocates fought to reduce the rate hikes, the ICC ruled to cut the proposed increases by about $240 million, or 30 percent. Here’s a breakdown: 

Utility  What utility proposed What ICC approved How much was the rate hike reduced? 
Nicor Gas $320 million  $223 million $96.99 million, or 30%, less than what Nicor wanted
Peoples Gas $403.98 million  $302.9 million  $101.12 million, or 25%, less than what Peoples wanted
Ameren Illinois $71.57 million $35.23 million $36.34 million, or 51%, less than what Ameren wanted
North Shore Gas  $16.59 million $11.02 million  $5.57 million, or 34%, less than what Nicor wanted
Totals $812.14 million $572.15 million $240.02 million, or 30 percent less than what the utilities wanted

Note: Of the total rate-hike requests above, about $266 million, or about 33 percent, was already being recovered from customers through the Qualified Infrastructure Plant (QIP) charge on gas bills, and the ICC did not have the authority to reduce that amount. Under the QIP law, those funds ($207 million for Peoples Gas and $59 million for Nicor) were simply transferred from the QIP line item to regular delivery charges as part of the rate cases. Consumer advocates can challenge QIP spending in separate reconciliation proceedings in the future, and regulators can issue refunds of any costs they deem excessive and unnecessary. Over the last decade, the QIP line item has allowed gas utilities to more quickly rake in revenue outside a standard, 11-month ICC rate case proceeding. The fee was approved by the General Assembly in 2013 but sunsets, thankfully, at the end of 2023.

How will these rate hikes impact customers? 

All of the utilities, except North Shore Gas, have filed their new rates with the ICC. Those rates are reflected in CUB’s Making Sense of Your Gas Bill fact sheet. (CUB will update this fact sheet when we determine North Shore Gas’ new rates.)

The increases, which took effect on Nov. 28 for Ameren and Dec. 1 for Nicor and Peoples Gas, impact delivery rates, which take up about a third to a half of gas bills. It’s what the utilities charge customers to cover the costs of delivering gas to homes—plus a profit.

The two main delivery charges are the customer charge, a fixed monthly fee on bills, and a volumetric distribution rate, a per-therm fee. CUB doesn’t like high customer charges because customers have no power to do anything about them. With the per-therm distribution charge, at least, you can use energy efficiency to reduce your bills. (See CUB’s Clean Energy page for efficiency tips.) 

The good news is that the ICC approved lower customer charges than the utilities wanted. In fact, the customer charges actually went down for Nicor and Peoples customers. (It’s going up for Ameren.) 

Summary of Charges, for customers who heat with gas 

Utility  Customer Charge (monthly fee) Distribution Charge (cents per therm)
Ameren Illinois $20.89 (UP from $19.43) 43.776 cents (UP from 31.935 cents)
Nicor Gas $18.88 (DOWN from $23.30) 21.34 cents (UP from 10.67 cents)
Peoples Gas  $27.36 (DOWN from $33.43) 46.424 cents (UP from 19.477 cents)
North Shore Gas $21.11 (DOWN from 79.309¢ per day, or $24 per month) 18.671 cents (UP from 12.896 cents)

Reminder: The rate hikes do NOT affect the supply side of bills, also called the Purchased Gas Adjustment (PGA) charge. The PGA charge, which can change monthly, covers what the utilities pay to purchase gas on the market. The gas utilities are not allowed to profit off the PGA–they’re supposed to pass those costs onto customers, with no markup. 

Did the ICC ruling affect the Peoples Gas pipeline-replacement program? 

Yes. Another highlight of the ICC rulings was that it paused Peoples Gas’ over-budget and behind-schedule pipeline-replacement program (known as the System Modernization Program, or SMP), pending a state regulatory investigation into the program’s management. The ICC made it clear that the utility still has the responsibility to keep its system safe, respond to emergencies and repair any leaks. 

Launched in 2011, the pipeline project has been behind-schedule and over-budget almost from the beginning, with its projected costs rising from about $2 billion to as much as $11 billion. For years, audits, studies and analyses have found problems—and in one filing with state regulators earlier this year, the company admitted it had not done an overall cost-analysis of the program since 2015. 

The rising costs of the program have helped spark a heating-affordability crisis in Chicago. Customers were paying about $50 a month in total fixed charges—before using any gas—and there have been alarming signs that a large number of residents can’t afford their gas bills: Consistently, about one in five Peoples Gas customers have been more than 30 days behind on their bills. Rising gas bills have hit historically disadvantaged and Black and Brown neighborhoods the hardest. In Englewood, for example, nearly half of Peoples Gas customers have been in debt by an average approaching $1,000.

On the other hand, the pipe program has been a boon to Peoples Gas. The utility’s out-of-state parent company, WEC Energy Group, said it was a major profit driver, helping Peoples rake in six consecutive years of record profits. But with the ruling, the ICC instituted a moratorium on the SMP for 2024, pending a regulatory review of how Peoples Gas is administering the program. CUB looks forward to working to reform this program, to eliminate reckless, unnecessary spending and to make sure Peoples Gas conducts pipe-replacement in a reasonable, cost-efficient way that keeps the system safe. 

What were other highlights of the ruling? 

  • Return on Equity, ROE (profit rate for shareholders): A major part of CUB’s case against the gas rate hikes involved shining a light on the fact that while the companies argued they needed the increases to maintain and improve their systems, the excessive Return on Equity (shareholder profit rate) they pushed exposed their financial motive. In all cases, regulators slashed the ROE requested by the utilities–even a seemingly small reduction in ROE can be a significant amount of money–tens of millions of dollars. In all the cases, state regulators reduced the ROE below what the company’s wanted. See the breakdown below: 
Utility  ROE they had ROE they wanted ROE the ICC grated
Nicor Gas 9.73% 10.35% 9.51%
Peoples Gas 9.05% 9.9% 9.38%
Ameren Illinois 9.67% 10.3% 9.44%
North Shore Gas 9.67% 9.9% 9.38%
  • Low-Income Discount Rate: For all gas utilities, the rulings also established a new discount rate for lower-income customers, beginning October 2024. Those discount rates will be for gas customers whose incomes are up to 300 percent of the federal poverty level. Customers already enrolled in the Low Income Home Energy Assistance Program (LIHEAP) will automatically qualify for this rate. It sets five tiers of discounts for households in relation to federal poverty guidelines–with discounts ranging from 5-75 percent of the total bill for Ameren and Nicor; 5-83 percent for Peoples Gas; and 5-79 percent for North Shore Gas. More work needs to be done to implement this provision of the rulings, and CUB will release more information before these discount rates go into effect. 
  • Future of Gas proceedings: The rulings also initiated “future of gas” proceedings, requiring the utilities to account for the future of their infrastructure as market trends lead customers to convert from gas to electricity for their heat. “As the State embarks on a journey toward a 100 percent clean energy economy, the gas system’s operations will not continue to exist in its current form,” ICC Chairman Doug Scot said in news releases announcing the rulings. “Identifying how our gas and electric systems can adapt to meet these goals, and what specific actions should be taken to achieve them, will be an important task for the Commission moving forward.” 

This is an important provision in the ruling, as gas supply price spikes and utility rate hikes on the delivery side of bills are an ongoing problem for consumers. That’s why CUB and other consumer advocates are beginning to work for local and state policies to help consumers make the long transition away from gas to forms of heat that are cleaner and more affordable. This won’t happen overnight, but we need to start planning now to avoid the “utility death spiral.” That’s where fed-up customers electrify their homes and leave the gas utilities, forcing lower-income customers who aren’t able to switch to shoulder the growing costs of maintaining the utility’s outdated system. We must assure that the most vulnerable customers are protected and benefit from a transition to cheaper, cleaner forms of heat, like electric heat pumps. (Order CUB’s free Better Heat guide.)

What was CUB’s response to the rulings? 

In a statement, CUB applauded the ICC

“Rate hikes are never a cause for celebration, and we’re dismayed that bills will increase for gas customers throughout Illinois – but we’re thankful that the Illinois Commerce Commission demonstrated real resolve to rein in reckless profit-mongering by the state’s gas utilities in ways we haven’t seen in a long time,” said CUB Executive Director Sarah Moskowitz. 

What are the latest developments since November’s rulings?

A lot has happened:  

  • On Dec. 1, Peoples Gas filed an emergency motion to claw back about $134 million in funding for its mismanaged pipe program, threatening job losses and safety problems. CUB slammed the irresponsible, disingenuous motion: “It is outrageous for Peoples Gas, which has been rolling in six straight years of record profits and just received a record rate hike, to claim that it suddenly doesn’t have the resources to conduct repairs to its system and pay its workers.”
  • On Dec. 14, the ICC rejected the motion. “Less than three weeks after receiving a record rate hike, Peoples Gas tried to bully the ICC into raising costs, yet again, for the utility’s beleaguered customers by manufacturing a fictitious emergency,” CUB said. “We’re grateful that regulators saw through these blatant theatrics and protected Chicago consumers…”

But that same day, we were shocked by a new development:

  • Dec. 14, CUB discovered a document Peoples Gas filed with state regulators stating that it “anticipates” filing yet another rate hike in 2024! ”This is another glaring example that there seems to be no limits to Peoples Gas’ greed,” CUB said.
  • Predictably, in December Peoples Gas, Nicor Gas and Ameren Illinois all filed “petitions for rehearing,” asking regulators to reconsider the gas rulings. State regulators rejected the Nicor and Ameren petitions, and Ameren has now appealed to the Illinois Appellate Court. For Peoples Gas, regulators granted a narrow rehearing of the case. We’ll fight any attempt by Peoples Gas to raise rates. (Note: Any party in a rate case can file a petition for rehearing within 30 days of a final ruling. CUB unsuccessfully filed one in the Ameren gas case to see if it could cut the rate hike more. Once a petition is filed, the ICC has 20 days to rule on it. If the petition is rejected, the petitioner has the option to appeal to the Illinois Court of Appeals.)