Peoples Gas shatters earnings record it set the year before
By Steve Daniels, Crain’s Chicago Business, April 1, 2020
For Peoples Gas these days, records are made to be broken. Last year the natural gas utility serving the city of Chicago blew through the record it set in 2018, posting $156 million in net income.
The 18 percent increase from the $132 million it recorded in 2018—then a record—was due almost entirely to a big spike in monthly surcharges the utility charged Chicago households and businesses for a historically costly infrastructure-upgrade program. The figures were disclosed in an annual report filed March 31 with the Illinois Commerce Commission.
Peoples Gas’ revenue from the monthly surcharge last year was $117 million, up 43 percent from $82 million in 2018, according to ICC filings.
At the same time, Peoples wrote off a record $74 million in uncollectible accounts, according to the annual filing. Separate recoveries of $14 million enabled Peoples Gas to post a $60 million net charge-off rate, also an all-time high.
Under state law, the utility recovers the cost of bad debt from other ratepayers in a separate monthly surcharge, so there’s little risk to its earnings from customers who can’t pay.
The new figures were the latest evidence of how Peoples and its Milwaukee-based parent WEC Energy Group are profiting on the higher heating bills that more and more Chicagoans are unable to afford.
Peoples paid $50 million in dividends to its parent last year, helping to support a 7 percent increase earlier this year to WEC Energy Group shareholders.
In an emailed response to questions, Peoples pointed to a recent engineering study of its system, which concluded that more than 80 percent of the gas pipes in Chicago had an average remaining life of less than 15 years.
The utility also said it was “passing along” the benefits of lower taxes and lower fuel prices to consumers. “The result: A typical residential customer in Chicago is paying 6 percent less today than they were in 2013,” the utility said.
Peoples is barred by law from profiting on the gas it purchases on behalf of customers and that state regulators required it to share the benefits of lower taxes with ratepayers. In addition, the year Peoples chose—2013—was a year in which the cost of natural gas in the five heating months of January, February, March, November and December was 31 percent higher than it was in the same months last year.
Peoples also said WEC Energy provided $85 million in equity to Peoples last year, helping to finance the immediate costs of the infrastructure program.
With an increasing number of Chicagoans losing their jobs as the economy falls into recession due to the coronavirus pandemic, Peoples was asked if it would change course this year and reduce its charges. For now, Peoples (like all utilities) is barred from disconnecting customers for lack of payment. But the uncollectible costs that paying customers will have to absorb will keep climbing.
“We will continue to closely monitor the situation surrounding COVID-19,” the utility responded. “We understand some of our customers will face financial hardships due to the spread of COVID-19. We have suspended disconnections for all customers, except in the case of natural gas leaks or unsafe conditions. This is effective until this health crisis is behind us. We are also waiving late payment charges. We are committed to working with all of our customers, and have payment plans available.”
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