Chicagoans would see much higher utility bills if expected rate hikes for electricity and natural gas are approved even though energy production prices are now low.
ComEd and Peoples Gas are planning significant capital spending that threatens to eat up any savings that might have come from low energy prices.
“There will be a significant effect on customers’ bills,” says Jeff Orcutt, president of the consulting firm Chapman Energy Strategies, which analyzes utilities for the Illinois Public Interest Research Group.
David Kolata, executive director of the Citizens Utility Board, another private, not-for-profit watchdog group, says there’s “no question” ComEd’s latest spending projections will boost customers’ bills. And he says an expected Peoples Gas rate hike could create an “impending crisis” for low-income consumers.
“It’s on an unsustainable path, and it’s been for some time,” Kolata says of Peoples Gas’ spending for pipeline replacements.
ComEd sets its rates under a formula approved by the Illinois Legislature in 2011 that runs though 2022. That setup gives ComEd more leeway to spend than under a traditional regulatory scheme.
Peoples Gas has a special bill rider — a fee on top of normal gas bills, also approved by the Legislature — to fund its pipeline work. Consumers now pay about $75 a year for that, but a study has warned that could jump to $750 by 2040.
Federal investigators have been eyeing ComEd and its parent Exelon regarding their lobbying in Springfield.
Joe Dominguez, ComEd’s chief executive officer, says the utility’s rates are among the lowest in the country and have fallen for three of the past five years. ComEd will submit its 2020 rate proposal to the Illinois Commerce Commission in April, Dominguez says.
According to a Feb. 11 earnings call with investors, ComEd is planning $7.6 billion in capital spending for its distribution business over the next four years, which would increase its rate base by about $3.7 billion.
Rate base refers to the value of a utility’s assets. It’s multiplied by the utility’s allowed return on equity to determine its profit.
“Increasing the rate base means higher profits and higher bills,” says Abe Scarr, state director for Illinois PIRG.
ComEd is spending about $2 billion a year to upgrade its system, similar to what it reported from 2015 to 2018, the height of its “smart grid” program. That work is largely done, but Dominguez says the utility still has 4,000 miles of cable to replace after having completed 5,000 miles of cable work since 2012.
“Our infrastructure was in bad shape seven, eight years ago,” he says. “We’ve gone from one of the worst utilities to being arguably one of the best in the nation. We want to maintain that progress.”
ComEd also needs to accommodate new businesses and power-hungry data centers, as well as more electric vehicles, according to Dominguez.
“We need to do this to serve new customers reliably,” he says.
An ICC spokeswoman says any spending will still be “subject to a thorough review” and “only allowed if prudent and reasonable.”
Consumers’ bills from Peoples Gas are widely expected to go up because of massive pipeline-replacement work that could ultimately cost $8 billion.
Peoples Gas spokeswoman Danisha Hall won’t say when the company will file for a rate increase — something CUB and Illinois PIRG expect to happen sometime in March.
“We have been assessing the possibility of filing a regulatory rate review,” Hall says. “Our last regulatory rate review was completed nearly five years ago in 2015. We are always assessing our capability to continue providing our customers with the safe and reliable natural gas delivery service they deserve.”
Peoples Gas says its spending is necessary to keep the system safe and efficient.
The work has helped push the monthly cost of gas service to about $38 even before a customer uses a single therm of gas. CUB’s Kolata sees that rising to as much as $60 within five to eight years.
As new homes move away from natural gas to lessen their carbon footprint, a shrinking number of remaining customers will shoulder the pipeline spending, says Rob Kelter, senior attorney for the Environmental Law & Policy Center.
Kolata says he worries that a polar-vortex-type winter could sink lower-income customers.
“There are frightening scenarios if you play this out, where it’s going to be tough,” he says.
The consumer groups are backing the proposed Clean Energy Jobs Act in Springfield, which would create an energy plan and press utilities to meet green-energy targets.