Turn down the dial on rising Peoples Gas costs

Many customers already are struggling to pay their bills. The cost of the pipeline replacement program has ballooned to what looks like some $11 billion by the time the project is expected to be finished in 2048, eight years behind schedule.

SHARE Turn down the dial on rising Peoples Gas costs
Peoples Gas crew work on installing a new 12-inch main on the 3200 block of W. Eastwood in Albany Park neighborhood, Chicago, June 18, 2019. Peoples Gas is undergoing a massive underground overhaul of its residential natural gas pipe system.

Peoples Gas crews work on installing a new gas main in Albany Park in June 2019. The cost of the pipeline replacement program continues to balloon.

Victor Hilitski/For the Sun-Times

Why does Peoples Gas Co.’s parent company keep making higher profits while a significant sector of Chicagoans are struggling to pay their heating bills?

Obviously, things are out of whack. The Legislature needs to fix this.

Peoples has undertaken a long-term pipeline replacement program, which the company says is needed to prevent hazardous leaks from its aging network of pipes. And, yes, safety is very important.

But to help pay for replacing some 2,000 miles of natural gas mains under the streets, sidewalks and parkways of Chicago, the company secured a legislative rider that allows it to spend money more quickly than many ratepayers — customers — can afford and expand the project beyond what critics see as reasonable.

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Peoples is using the extra money it gets to upgrade its entire system, rather than the pipes most at risk. The cost has ballooned from an estimated $1.4 billion in 2007 to what looks like some $11 billion by the time the project is expected to be finished in 2048, as Crain’s Chicago Business reported, eight years behind schedule.

Efforts to revoke the rider have died in Springfield year after year. Now, as the rider is scheduled to sunset at the end of 2023, there may be an effort in the Legislature to renew it in the upcoming session or replace it with a similar program under a different name. That would inflict more pain on ratepayers in the city. Most homes in the Chicago area are heated by gas.

Mayor Lori Lightfoot and Gov. J.B. Pritzker oppose Peoples’ efforts to extend the surcharge. They should hold firm.

If the rider is not renewed, Peoples says it would come back instead with a traditional request for a rate increase. That, though, would have to get approval from the Illinois Commerce Commission. Now, critics say, the rider essentially gives Peoples automatic increases.

Until now, much of the cost of the pipe replacement program has been masked because natural gas prices were low and pandemic money helped people pay their bills. Now prices are trending up, and could be double what people were paying just two years ago. Although nationwide gas prices have dipped from a summer high, consumer advocates worry about an affordability crisis this winter if the weather is cold. In some Zip codes on the West and South Sides, more than 50% of ratepayers already are behind on their bills.

The higher cost for the delivery portion of bills — the part that pays for the pipeline grid and improvements — won’t help. Critics say average ratepayers soon could be paying $50 before using a single therm of natural gas.

The ground is shifting under Peoples’ feet as the world transitions to renewable energy. Chicago wants to decarbonize its buildings over the next two decades. Illinois has set a goal of transitioning to renewable energy by 2050. Money available through the Inflation Reduction Act will provide subsidies for people to buy heat pumps to heat their homes, reducing their need for gas. People will be encouraged to replace gas appliances with electric ones, powered by renewable energy.

Those most likely to transition from gas are those who can afford to. Those left behind will have to pick up a bigger and bigger share of the replacement program through their gas bills. The crisis of affordability only will get worse.

Peoples, the city and the Legislature need to figure this out. The city needs a gas distribution system that is safe for the next couple of decades. Gas needs to be affordable. And the city should not be left with a huge stranded asset on its hands, as both the city and state transition to carbon-free energy. 

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