Regulators slash Chicago gas utility’s rate request, setting up likely legal battle

Regulators at the Illinois Commerce Commission on Thursday once again reduced a request to increase customer rates from Chicago natural gas utility Peoples Gas.

In November, the ICC paused all spending related to Peoples Gas’ controversial “Safety Modernization Program” for replacing aging infrastructure and reduced its $404 million rate request to $303 million — which was still the largest ever increase granted by the state.

Peoples Gas, which serves 894,000 customers in Chicago, then requested another hearing, asking for another $7.9 million rate increase based on the argument that much of the spending the ICC paused was necessary to conduct emergency repair work and other critical upgrades.

But regulators once again pushed back on these claims in reducing the increase to $1.6 million, based on the recommendation of the Illinois Attorney General. This smaller increase was approved out of an abundance of caution, ICC Chair Doug Scott said.

The ICC came to its decision because Peoples Gas used a broad definition of emergency work and that the company failed to provide enough information to justify the increased spending, Scott said Thursday.

“The Commission’s decision should in no way prohibit Peoples Gas from performing necessary emergency work to maintain a safe and reliable gas system,” Scott said in a Friday morning statement. “While still important, the bulk of Peoples’ system and public improvement work falls under the utility’s general reliability responsibilities to its consumers and does not constitute true emergency work.”

Board member Stacey Paradis said the company’s pipeline replacement program was “over budget and with an ambiguous scope,” noting that the program was currently under investigation at the ICC.

The decision likely sets up a legal battle in the state’s appeals court, with the company contending in a Thursday statement that the work that the ICC disallowed is required to comply with federal safety requirements and that it will appeal the decision.

The move continues a trend that began last fall of the agency’s board of commissioners — which has traditionally been friendlier to utility companies — siding with consumer advocates and pushing back on requested rate increases.

As a result of this decision, typical residential bills are expected to go up by about 15 cents per month, less than the 60 cents per month the company requested, according to Peoples Gas spokesperson David Schwartz.

“The Commission’s decision risks the continued safety and reliability of Chicago’s energy system,” Schwartz said in a statement on Thursday.

That sentiment echoes that of the International Union of Operating Engineers Local 150, a union which represents much of Peoples Gas’ on-the-ground workforce.

Earlier this week, the union urged the ICC to approve the company’s full request for spending. Local 150 President James Sweeney said the original November decision to limit that spending created safety risks and cost thousands of jobs.

The rehearing decision contradicted recommendations from the ICC’s own staff and a proposal from an independent administrative judge earlier in the case, who recommended approving the full spending amount.

Consumer advocates who have long railed against the company’s pipeline replacement program praised the decision.

“This proceeding provided further evidence that the Peoples Gas pipe replacement program is profoundly troubled, reinforcing why the commission’s investigation is critically important,” Abe Scarr, a longtime critic of Peoples Gas and head of the advocacy group Illinois PIRG, said in a statement.

The Citizens Utility Board, a nonprofit set up by the state to represent consumers in cases like this, also issued a statement applauding the decision. Sarah Moskowitz, CUB’s executive director, noted in the organization’s statement that Chicago remains “engulfed in an affordability crisis.”

Approximately one in five Peoples Gas residential customers had outstanding debt to the company as of April 30, with 39 percent of low-income customers having debt, according to data from the ICC.

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