Complaint: Peoples Gas officials ‘misled’ regulators about cost overruns

SHARE Complaint: Peoples Gas officials ‘misled’ regulators about cost overruns
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Illinois Attorney General Lisa Madigan in November. File Photo. | Rich Hein/Sun-Times

Top officers of Peoples Gas “knowingly misled” state regulators about the ballooning cost of a multibillion-dollar upgrade program to pave the way for a 2015 merger, according to a complaint filed by Attorney General Lisa Madigan and a utility watchdog.

When executives for Peoples and parent company Integrys testified last spring before the Illinois Commerce Commission about the company’s merger with Wisconsin Energy, they repeatedly told commissioners they had no projections on the costs of replacing gas mains in Chicago beyond a publicly announced estimate of $4.5 billion.

In a complaint filed last week to the ICC, Madigan and the Citizens Utility Board say a state audit showed company officials had seen internal reports that the estimated cost— paid for by fees tacked on to Chicagoans’ gas bills— had reached more than $8 billion.

Madigan and the Citizens Utility Board called on the ICC to again put gas company executives under oath, to find out whether they violated state law by not disclosing the soaring costs of the program utility company’s Accelerated Main Replacement Program.

“This is a program that has not been good for consumers,” said David Kolata, executive director of the Citizens Utility Board. “We need a thorough investigation of who knew what and when they knew it, and what went wrong.”

Kolata said Tuesday that any violation of state law should require Peoples to pay fines, and possibly refund money to customers.

When he testified in May 2015, former Integrys CEO Charles Schrock repeatedly told commissioners the company had not completed cost estimates for the gas main replacement program since 2014, when the company admitted overruns had more than doubled the original price tag of $2.2 million.

In fact, Madigan said state audits showed Schrock and other company officials received a report a month before the hearing that showed costs had climbed to $8 billion. Schrock received $34 million in cash and stock after the merger went through, according to company filings.

A Peoples Gas spokesman did not immediately respond to questions from the Chicago Sun-Times on Tuesday.

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