City Treasurer Conyears-Ervin Urges IL Regulators to slash Peoples Gas Unjust Record Rate Hike

Watchdog group seeks to cut more than $110 million from record Peoples Gas rate hike request

By Robert Channick
Chicago Tribune
Jun 01, 2023

David Kolata, of the Citizens Utility Board, answers questions from the Chicago Tribune Editorial Board in 2016. (Nancy Stone/Chicago Tribune)

Empowered by the end of a 10-year legislative surcharge for the pipeline replacement program, the Citizens Utility Board is working to cut more than $110 million from a record Peoples Gas rate hike request, which is pending before state regulators.

Targeting everything from the “mismanaged” pipeline project to high residential heating costs, the consumer watchdog group recommended slashing $63 million from the proposal, with the Illinois attorney general’s office expected to seek $49 million in additional reductions.

“Peoples Gas customers have been suffering for years under rapidly rising bills, as the company rakes in record profits,” David Kolata, CUB’s executive director, said in a news release Thursday. “This rate hike is unjust and unreasonable, and we urge state regulators to hold the utility accountable.”

Peoples Gas filed for the $402 million rate increase in January with the Illinois Commerce Commission. If approved, it would add $11.83 per month to the average residential customer bill beginning next January. The rate request includes $207 million to continue the pipeline replacement program, which is set to lose funding at the end of the year.

Last month, CUB submitted testimony to the ICC from energy consultants Brubaker & Associates that challenged Peoples’ request for a 10% return on equity for shareholders, arguing for a “more reasonable” 9.5% profit rate, which would reduce the proposed increase by $14 million. In addition, CUB seeks to reduce the cost for financing infrastructure projects by $18 million.

The watchdog group also argued against bonuses for Peoples Gas executives tied to shareholder return. That would cut the proposed rate hike by another $9 million.

“It’s unfortunate that CUB continues to make incorrect claims,” Peoples Gas spokesperson David Schwartz said in a statement Thursday. “If approved by state regulators, our request is not expected to increase the typical customer’s bills from last year. With natural gas prices falling, bills are expected to stay largely flat as new rates take effect in 2024.”

Peoples Gas has more than 884,000 customers in Chicago and its co-owned North Shore Gas has about 164,000 customers in the north suburbs. The utilities were acquired by Milwaukee-based WEC Energy Group in 2015.

While Peoples has legislative approval to automatically charge customers $15 per month to fund the pipeline program through December, CUB said customers currently pay about $50 per month in fixed costs — before using any gas — making it hard for a large number of Chicago residents to afford their heating bills.

In April, more than 1 in 5 Peoples Gas customers were more than 30 days behind on bills totaling $134 million, CUB said.

Speaking at a City Hall news conference Thursday, Treasurer Melissa Conyears-Ervin said the proposed Peoples Gas rate increase would hurt Chicago residents who could least afford it.

“At the same time that they are bringing in record profits, let’s take a closer look at who will bear this burden,” Conyears-Ervin said. “The working people of Chicago, people of color, who struggle already to make ends meet.”

It is the first rate increase request for Peoples since 2014, when the utility was granted legislative approval to fund its massive pipeline replacement program and pass costs along to customers for 10 years.

Launched in 2011, the System Modernization Program to replace 2,000 miles of aging iron pipes below Chicago streets was plagued from the outset by delays and budget overruns. More than a decade later, the pipeline replacement program is 36% complete, and Peoples Gas says it will take until 2040 and cost about $8 billion to finish.

It was originally projected to cost $2.6 billion and take 20 years to complete.

Consumer watchdog groups have been advocating for several years to end the built-in surcharge, putting Peoples’ spending under more regulatory scrutiny and forcing the utility to get infrastructure improvements approved through traditional rate cases.

Last week, CUB filed testimony with the ICC seeking to reduce ComEd’s proposed four-year, $1.47 billion rate increase by more than 60%.