Lisa Madigan wants investigation of Peoples Gas program

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Illinois Attorney General Lisa Madigan called for an investigation Monday of mismanagement and cost overruns in the “accelerated main replacement program” at People’s Gas. | Rich Hein/Sun-Times

In the wake of an independent audit of a Peoples Gas pipe-replacement program, Illinois Attorney General Lisa Madigan on Monday called for the Illinois Commerce Commission to investigate the program.

That audit, by Liberty Consulting Group, found that the Peoples Gas Accelerated Main Replacement Program could cost consumers $8 billion. Originally, the plan, proposed in 2009, was to cost about $2.5 billion.

The program “is in a complete state of disarray,” Madigan said. “The report documents the pervasive problems that are plaguing the program.”

Madigan’s office has filed two petitions with the Illinois Commerce Commission. One seeks an investigation into whether Peoples violated the Public Utilities Act by with holding the cost estimate from the commission. The other seeks a restructuring of program.

Peoples recently merged with Wisconsin Energy Corp. but did not reveal the cost during that merger process, Madigan said. Her office back in March had asked that the companies’ merger be delayed, but the commerce commission voted against that delay.

“This project is a disaster that raises serious questions about the safety, reliability and affordability of People’s Gas service,” Madigan said.

According to the audit report, the number of natural gas leaks has not gone down over the years. Madigan said there is a lack of cost-control as well as failure to maintain essential data that would allow the program to be properly monitored.

“Since the beginning, [the program] has been ineptly run by Peoples Energy,” Madigan said.

Peoples Gas agreed with Madigan “that the Accelerated Main Replacement Program (AMRP) needed a fresh start,” the company said in an emailed statement issued later Monday.

“As soon as Wisconsin Energy acquired Peoples Gas, our new management team began to take aggressive actions to improve the oversight and performance of the project. After the acquisition closed, our new management team learned that the previous outside contractor had developed an estimate showing that the program cost might rise to as much as $8 billion over the 20-year period,” said company spokeswoman Jennifer A. Block.

“We did not have confidence in that estimate. We have now assembled an experienced construction management team and hired a nationally known firm to develop a bottoms-up cost and scheduling model. We will provide the results of that review to the Illinois Commerce Commission by November 30th. We will continue to cooperate with all stakeholders, including the Illinois Commerce Commission and IL Attorney General.”

Peoples supplies natural gas to about 800,000 customers. According to the attorney general’s office, the pipe-replacement program will cost every customer $7,700 over the remaining life of the project, scheduled to conclude in 2030.

“This cost for a program that is so poorly run is simply unacceptable to Peoples Gas customers who already pay the highest natural gas delivery rates in Illinois,” Madigan said.

And it doesn’t matter if a consumer has chosen to purchase their natural gas through an alternative supplier, a spokesman for the Citizens Utility Board noted – Peoples Gas still maintains the delivery system, which its customers help pay to maintain.

“The fees that we pay on our gas bills in Chicago that support this pipe replacement program – those are fees that everyone pays, no matter if you’re with an alternative supplier or not,” said Jim Chilsen, director of communications at the Citizens Utility Board.

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