Peoples Gas system upgrade behind schedule, overpriced, consumer advocates say

Chicago gas utility has asked regulators to approve a $402 million rate increase.

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Peoples Gas customers could see an increase on their bills beginning early next year if a requested rate hike is approved.

Consumer advocates on Thursday slammed Peoples Gas over delays in its system improvement plan.

Ashlee Rezin/Sun-Times file

As Peoples Gas has asked regulators to approve a $400 million rate increase for Chicago customers, the company still isn’t meeting targets and controlling the costs of a system upgrade that began more than a decade ago, consumer advocates said Thursday.

Reports submitted this week to the Illinois Commerce Commission, which is reviewing a rate increase proposal from Peoples, showed the utility was behind on planned spending on replacing gas lines around the city — delays the company blamed on labor shortages.

A separate monthly report to the ICC showed that roughly one in five Peoples customers are more than a month behind on their bills, with a combined $100 million overdue, according to Abe Scarr, director of the Illinois Public Interest Research Group, a consumer advocacy organization.

The delays and cost of Peoples’ safety upgrade program, which has ballooned as much as tenfold from when the plan was developed in 2007, should give the ICC pause as it weighs granting the gas company a record rate increase that would take effect next year, Scarr said.

The initial estimate for the program — which had targeted replacing cast-iron pipes that were installed as long ago as the late 1800s — initially was estimated at $1 billion.

Scarr said Peoples has “retired” just 51 miles of aging pipe in the last quarter, 25% fewer than the company’s target.

Rather than focus on the most dangerous lines in the system, Peoples is using consumer fees to upgrade the entire system, Scarr said. Costs for the work, which is now projected not to be completed until 2040, could run to $11 billion or more, Scarr said.

“If safety is the metric — and, for consumers, I think it’s the key metric — then [Peoples] is way behind again, as they have been every year,” Scarr said.

Since 2014, the state has allowed Peoples to tack a “rider” onto customers’ bills that started at about $1 per month but now averages about $15 per household, Scarr said. The rider sunsets this year, but Peoples’ rate increase would continue to subsidize the cost with increased delivery charges. The company said falling market prices for gas would mean a typical consumer’s bill would remain the same despite the rate increase.

“This report shows that Peoples Gas continues to mismanage this huge project, and we hope ICC will demand reforms to address the costs and the safety needs of consumers,” Scarr said in an interview, noting the company’s annual profits have been at record levels each year since 2016.

A Peoples Gas spokesman called Scarr’s critique “false and misleading antics.”

“Our work to replace Chicago’s rapidly corroding iron pipes is on budget and on schedule. The data we reported this week to regulators confirms the program’s success and importance,” Peoples spokesman David Schwartz said in an email.

“The rate filing we submitted last month is the first time in nine years we have asked to raise base rates. After nearly a decade of cutting costs and finding efficiencies, a rate filing became necessary to ensure the ongoing safety, reliability and environmental sustainability in Chicago’s system, he said.

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