On Wednesday, the state agency that regulates utilities refused to step in and slow the pace of a pricey Peoples Gas pipeline modernization project that advocates and the state’s attorney general say will double the price consumers in Chicago pay to heat their homes.
Illinois Commerce Commission Chairman Brien Sheahan acknowledged that long-term costs — which are currently passed on to customers in the form of a monthly surcharge — “will cause too great a burden for too many households in Chicago.”
But Sheahan said his hands were tied by state law and voted in favor of allowing the utility company to continue the charges.
Illinois Attorney General Lisa Madigan’s office swiftly condemned the decision, saying state regulators would be well within its right to intervene.
Madigan said the state’s Public Utilities Act allows the ICC to take such measures as capping the utility company’s yearly spending on the project at $130 million, which Madigan’s office has suggested. Now the cap is $300 million.
By slowing down spending and spreading it out over time, the incremental cost increases would be more manageable to consumers, Madigan argues.
At its current clip, the $1,200 average yearly heating cost of a Chicagoan would double in 15 years.
“The Commission’s decision allows Peoples Gas to continue excessive, unchecked spending for a program that has been mismanaged from the start,” Madigan said in a statement. “Peoples Gas customers already pay the highest natural gas delivery service rates in the state. By failing to exercise its regulatory authority, today’s ICC decision guarantees that Peoples Gas’ customers will continue to pay unfairly high rates for the company’s poorly run program.”
An expert hired by the attorney general’s office concluded that if Peoples is allowed to continue to spend as it has proposed, the program itself will have an annual residential customer rate impact of $785 by 2040. And the total related costs billed to the average residential heating customer over the life of the program will likely be in excess of $22,000.
Vanessa Hall, a spokeswoman for Peoples Gas, said projections that gas bills would double by 2030 or 2040 “is just not accurate.”
“Our estimated bill impact is only 2 to 3 percent annually,” Hall said in an email.
“After an extensive two-year review, the Commission today confirmed that our plan for modernizing the natural gas delivery system is the best approach to cost effectively provide a safer, more reliable system for nearly 1 million Chicago families and businesses,” she said.
The program began in 2011 when Peoples Gas, arguing that safety was at risk, began working at an accelerated speed to replace aging and sometimes leaky gas mains — about 2,000 miles worth.
Normally, maintenance costs are covered in a customer’s monthly bill. But the utility company successfully lobbied lawmakers for the right to add a surcharge to cover the cost of the program.
The surcharges began appearing on customer bills in 2014.
Madigan’s office has said the project has cost at least twice as much as similar modernization projects in comparable cities.
The program quickly encountered trouble.
There was mismanagement by contractors charged with doing the work. And cost estimates and spending ballooned. The original price tag was $2.6 billion; it’s currently closer to $8 billion.
According to an audit ordered by the ICC following an outcry by advocacy groups and Madigan’s office, Peoples Gas, under its previous parent company Integrys Energy Group, intentionally misled authorities about the potential cost of the project. Auditors issued 95 recommendations for changes to the program.
Grievances were brought before an administrative law judge who was tasked with re-examining the scope and scale of the project before offering a recommendation to the ICC.
On Wednesday, in a 3-1 vote, the ICC approved the recommendation.
The three members who voted in favor of the recommendation were appointed by Gov. Bruce Rauner. The one “no” vote came from Miguel del Valle, the former city clerk of Chicago who was appointed by former Gov. Pat Quinn.
“We are reviewing the decision and will evaluate our options,” a Madigan spokeswoman said.
