How long before Chicagoans pay twice what suburbanites do for winter heat?
By Steve Daniels, Crain’s Chicago Business. July 20, 2018
It’s summertime in Chicago, so forgive the cold jolt. But Chicagoans last year paid 80 percent more to heat their homes than suburbanites who get their natural gas from Nicor Gas.
The gulf between customers of Chicago’s Peoples Gas and Naperville-based Nicor was far greater than it has been over the years. Chicagoans for years have had to pay more, but as recently as the winters of 2011-12 and 2012-13 the difference was 35 percent. And, often, at least some of it could be explained by the relative abilities of the two utilities to buy the fuel on behalf of their customers.
But now Peoples’ headlong capital spending rush—and past rate hikes to pay for it along with an ongoing surcharge on monthly bills to recover much of the current costs as they’re incurred—appears to be behind the striking disparity in what city dwellers now are paying to stay warm versus suburbanites.
Over the five-month heating season from November 2017 to March 2018, the average household in Peoples’ service territory paid $787.11, according to the utility. That was an average of over $157 per month. Residents in the more than 650 suburbs served by Nicor paid on average $435.87, or about $87 per month, over that time frame, a spokesman says.
The scary part for Chicagoans is that last winter the price they paid for the fuel itself (as opposed to delivering it) was the second-lowest it’s been in the past nine years. Utilities pass along the cost of the gas itself at no markup, instead profiting on their regulated rates to maintain and operate the delivery system.
For the average Nicor residential customer, a little over $279, or nearly two-thirds, of the winter heating bill went for the fuel. The remainder was the cost of delivering it, taxes and other charges. Contrast that with the average Peoples customer. Just like with Nicor, the average household paid a little over $279 for the fuel. But that accounted for only 36 percent of the bill total for the winter. The average Chicagoan paid Peoples more than $500 in delivery rates, taxes and other charges. The average Nicor household paid only about $157 for those things.
Now, think back four years. The polar vortex. Schools closing down because it really was that cold. People stuck at home, cranking the radiators and cursing the poor insulation.
Average household consumption of natural gas during that five-month period in Chicago was 24 percent higher than it was this past winter. And the average cost of gas for Peoples customers over that time was 65 percent higher. The average Chicagoan paid nearly $1,090 during that winter. More than $571 of that, or 52 percent, was the cost of fuel. The remainder, about $519, was delivery charges, taxes, etc. How much have those costs soared since then for Chicagoans? The $500 they paid this past winter wasn’t much less despite far lower usage.
So you can imagine just how painful those Peoples Gas bills would be in another polar-vortex scenario. “It’s a looming disaster,” says David Kolata, executive director of Citizens Utility Board, a consumer advocate in Chicago. “And it’s fundamentally unfair. The city has been the economic driver of the region. . . .Our frustration is it’s kind of like a slow-motion train wreck.”
CALLS FOR RELIEF
CUB, along with Illinois Attorney General Lisa Madigan, has pleaded with the Illinois Commerce Commission, which regulates utilities, to address what even ICC Chairman Brien Sheahan acknowledges could soon be a heating-affordability crisis in Chicago.
Meanwhile, Peoples’ spending binge continues. The ICC has ruled that it is powerless under state law to rein in the unprecedented $300 million-a-year spending program Peoples is pursuing to upgrade aging gas mains below Chicago’s streets.
In an email, ICC spokeswoman Victoria Crawford writes that the commission sets rates on a case-by-case basis, “relying on evidence of what it costs an individual utility to serve customers in different classes.” She emphasizes that the gas pipes in Chicago are older than in the suburbs and more in need of upgrading. Costs to do that in an urban environment are higher than in the suburbs, she writes.
How did we get here? Since 2010, the ICC has granted Peoples three delivery rate hikes totaling $202 million. From 2009 to the present, Nicor obtained two rate increases totaling $174 million. The difference is that Peoples spreads those increases among just 845,000 customers, while Nicor’s 2.2 million customers can far more easily absorb the price hikes.
Just how far apart are the two utilities in their charges? Nicor charges residential heating customers a flat monthly fee of $16.59, plus 4.71 cents for each therm of natural gas consumed. Peoples’ monthly fee is $33.47, and its per-therm charge is 19.48 cents, according to an ICC filing.
There also are vast differences in the monthly surcharges the utilities can impose on customers to finance infrastructure improvements. Under a state law enacted in 2013, the surcharges are assessed as a percentage of utilities’ base rates for each customer in a given month. The most recent filings, for July, show Peoples charging 18.3 percent of base rates and Nicor charging 2.3 percent. Over the course of the last winter, the average Peoples household paid between $5 and $6 per month in these surcharges.
Read the full article here.