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Statement: CUB applauds ICC for holding the line on Peoples Gas, as regulators thwart utility’s renewed bid for inflated spending on pipe-replacement

CHICAGO—Last November, the Illinois Commerce Commission (ICC) reduced Peoples Gas’ proposed rate hike by about $100 million and ordered the utility  to pause its controversial and financially bloated pipe-replacement program – known as  the System Modernization Program (SMP) – pending further review to determine whether it could substantiate the need for $265 million in 2024 investments it proposed for the initiative.  (Read a pdf version of this statement.) 

The ruling appeared to stagger Peoples Gas, which had become accustomed to habitually increasing charges on customer bills to pay for a pipe-replacement program with an estimated price tag that had ballooned from about $2 billion to $11 billion and come under widespread criticism for reckless spending.  Earlier this year, the utility asked the ICC to restore $145 million of the $265 million in pipe-replacement expenditures that regulators had halted. This would have increased customer rates by about $7.9 million. 

On Thursday, the ICC rejected all but a small fraction ($1.6 million) of Peoples’ request. In response, Sarah Moskowitz, Executive Director of the Citizens Utility Board (CUB), issued the following statement: 

We commend the Illinois Commerce Commission (ICC) for rejecting a six-month onslaught of scare-mongering and misinformation that Peoples Gas and its allies hurled at regulators in the hopes of pressuring them to restore much of the controversial pipeline-replacement program’s 2024 spending.

With today’s decision, the ICC reaffirmed that utilities should be prohibited from charging customers for expenditures they can’t justify. This is the fundamental principle of public accountability that regulators upheld last year when they instituted a moratorium on investment in Peoples Gas’ System Modernization Program (SMP), an initiative rife with mismanagement and cost overruns.

But rather than heed this principle and comply with the ruling, Peoples Gas instead attempted to coerce the ICC into restoring $145 million in spending on the disgraced SMP by exaggerating how much of the pipe-replacement work qualified as an “emergency” safety repair.

The ICC saw through the smokescreen.  As regulators know, Peoples Gas is already legally required to administer emergency pipeline repairs, and last year’s ruling halting SMP expenditures did not in any way change that mandate. Today, the ICC unanimously approved only an additional $28.5 million dollars “out of an abundance,” while rejecting the bulk of the spending Peoples sought to make under the false pretense of an urgent safety need.

With this decision, the ICC again displayed the kind of regulatory scrutiny needed to protect Illinois consumers from excessive costs. And to be sure, Peoples customers still desperately need the ICC to demand even more accountability of Peoples Gas. Even with today’s ruling, Chicagoans remain engulfed in an affordability crisis wrought by the Peoples’ indiscriminate spending on pipe-replacement.  As of April 30th, Chicagoans were more than $109 million in debt to Peoples Gas, as the fixed monthly costs of heating bills flirted with the $50 mark before customers used a trace of fuel.

We urge the Commission to continue to police Peoples Gas and all utilities with this same scrupulous eye.

Additional Notes:

Quotes from Thursday’s ICC meeting:

ICC Chairman Doug Scott: 
“The edits (by the Commission to the proposed order) further raise concern that the company, based on testimony provided by the City of Chicago, is mis-characterizing non-emergency work in the public way as emergency work…”

“In this proceeding, the burden to justify prudent and reasonable rates rests upon the utility to demonstrate to the Commission the need for any requested increase in revenue requirement…Without clear and consistent information and analysis, it is virtually impossible for the Commission to clearly understand and justify the investments proposed by the company. In this proceeding and in the principle docket the company failed multiple times to provide the Commission with the clear and consistent information to sufficiently review proposed spending by the company.”

ICC Commissioner Stacey Paradis expressed her disappointment on Peoples Gas’ lack of transparency regarding the company’s pipeline-replacement project (System Modernization Program), which she described as “currently over-budget and with an ambiguously defined scope”:

“I want to emphasize the importance of transparency when it comes to PGL’s SMP activities and investments….Going forward, I strongly encourage PGL to improve its transparency and candor when providing data, planning and analysis.”

What’s Next?
  • Rates will go up slightly as a result of today’s ruling–Peoples Gas says it will add about 15 cents a month to bills.  CUB will update our Making Sense of Your Gas Bill fact sheet when we confirm the new rates.
  • Peoples gas says it plans to appeal the ruling to the state Appeals Court.
  • The ICC has launched a probe of Peoples Gas’ dysfunctional pipeline-replacement program (Docket 24-0081). The investigation is expected to conclude in early 2025.
Background on today’s ruling: 
  • Back in November, the Illinois Commerce Commission (ICC) gave Peoples Gas a state-record increase, but the total was about $100 million less than what the company wanted. Plus, the company’s pipeline-replacement project (System Modernization Program), which has helped spark a heating-affordability crisis in Chicago, was paused for regulators to investigate whether it was being properly managed.
  • Peoples Gas has loudly complained that its rate hike, despite being the highest gas increase in Illinois history, was not enough. The company threatened job losses and safety problems and before 2023 was even over filed a motion to claw back some of the rate hike. The ICC rejected that motion, and instructed Peoples Gas to follow the appropriate process by requesting a rehearing of the rate case. 
  • The ICC later granted a rehearing on a narrow set of issues, which could have led to $145 in additional spending and $7.9 million being added to the company’s record rate hike.
  • On May 30, the ICC ruled unanimously to grant only $28.5 million in additional spending and a $1.6 million increase.