Fewer Chicagoans are buying above-market gas from suppliers as heating bills rise
By Steve Daniels, Crain’s Chicago Business. October 3, 2018
As the cost of winter heat rises in Chicago, fewer households in the city are purchasing natural gas from retail competitors of Peoples Gas.
That’s a good thing, since the natural gas peddled by non-utility providers is almost by definition pricier than that sold by utilities like Peoples and Naperville-based Nicor Gas.
Still, despite the lower number of Chicago households signing up for above-market natural gas, consumer complaints to the Illinois Commerce Commission about retail gas suppliers spiked 40 percent in the first half of 2018. They were at their highest level since the first half of 2014, when the polar vortex sent natural gas costs soaring, causing area-wide heating-bill sticker shock, but particularly in the city.
As of December 2017, 71,320 Chicago households were customers of a gas supplier other than Peoples Gas, according to a report issued Oct. 1 by the ICC. That was down 4 percent from 74,559 the year before and 40 percent from 119,709 at the end of 2015.
The share of city households buying gas from non-utility suppliers was 9 percent at the end of 2017 versus nearly 16 percent at the end of 2015.
When a customer signs up with a retail gas supplier, they’re buying only the commodity itself from that firm. In Chicago, the gas is delivered by Peoples Gas and in the suburbs by either Nicor or North Shore Gas, which is a subsidiary of the same Milwaukee-based company that owns Peoples.
Particularly in Chicago, the cost of heat is up due to rapidly rising delivery charges. Peoples Gas is spending hundreds of millions each year, an unprecedented capital-spending pace, to rapidly replace aging gas mains, which is contributing to the increase in delivery rates. The price of the gas itself remains cheap by historic standards.
In the past winter, residents in Chicago paid on average 80 percent more for heat than suburban households served by Nicor. Heat for Chicagoans for years has been more expensive than for suburbanites, but the difference usually has been more like 35 percent rather than 80 percent.
For those who sign up with outside suppliers, that difference is even greater. They generally pay more, and often far more, for the commodity than they would if they continued to buy from the utility. And no Chicagoan can escape the rapidly rising delivery charges.
For example, fixed-rate 12-month offers in Chicago posted by suppliers on the ICC website generally are running between 40 and 45 cents per therm right now. The gas charge at Peoples, which by law isn’t permitted to profit on the cost of the gas itself, is about 36 cents. So the markup is between 11 percent and 25 percent.
Over the course of last winter, residential customers paying the 18 percent more than Peoples’ price for gas would have shelled out an extra $50. That would be on top of the $787 they paid to heat their homes from November through March.
The number of households buying from suppliers in Nicor’s vast service territory, making up most of the Chicago’s suburbs other than a band along the North Shore and into the northwest suburbs, crept up last year. Some 240,333, or 11.8 percent of households served by Nicor, were signed up with suppliers as of the end of 2017. That was up 1.7 percent from the year before.
Market penetration by outside suppliers in the suburbs for years has been relatively stable. Suppliers only gained ground in Chicago itself following Peoples Gas’ poor performance in controlling gas prices during the polar vortex winter of 2013-14. In 2014, suppliers’ residential customer count in Chicago more than doubled, to over 98,000 from 45,571 at the end of 2013, according to the ICC.
City residents quickly got buyers’ remorse, and tens of thousands returned to the utility in the following two years.
So it’s odd that consumer complaints about gas suppliers are rising so fast. In the first half of 2018, the ICC received 301 complaints, 40 percent more than the 215 it got in the first half of 2017, according to statistics kept by the commission. The last year the commission got so many was in the first half of 2014, when 308 complained. That was while Chicagoans shivered during the polar vortex.
The spike in complaints took place despite the fact that the total number of Chicago-area households buying from gas suppliers in 2017 was about the same as in 2016.
Real the full Crain’s article here.