Peoples Gas rate hike should be slashed by $63 million, consumer watchdogs say

Peoples Gas maintains that most customers’ bills would remain “largely flat” despite the $402 million rate increase they’re asking the Illinois Commerce Commission to approve.

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Peoples Gas headquarters at 200 E. Randolph St.

Peoples Gas headquarters at 200 E. Randolph St.

Ashlee Rezin/Sun-Times

Consumer advocates at the Citizens Utility Board are urging state regulators to slash $63 million from a record-high rate hike request filed by Peoples Gas, arguing customers shouldn’t have to keep “bailing out” the natural gas utility for its over-budget pipeline replacement program.

Peoples Gas maintains that most customers’ bills would remain “largely flat” despite the $402 million rate increase it’s asking the Illinois Commerce Commission to approve, which it says is the cost of keeping Chicago’s natural gas system safe and reliable.

But the nonprofit watchdog CUB claims the sizable hike mostly pads “record profits” for the utility’s parent company, Milwaukee-based WEC Energy Group.

“This rate hike is unjust and unreasonable, and we urge state regulators to hold the utility accountable,” CUB Executive Director David Kolata said in a statement Thursday announcing the testimony it filed with the Illinois Commerce Commission against the utility’s request. “The writing is on the wall: As climate change worsens and our bills get higher, we can’t afford to continue bailing out Peoples Gas and an outdated and expensive fossil fuel system.”

The rate increase request filed by Peoples Gas in January would increase the average monthly bill by about $11.83 starting next year, a cost that the utility says it expects to be offset by falling natural gas prices.

Its $402 million request — which the five-person commerce commission must rule on by the end of the year — seeks to offset a state Legislature-approved $15-per-month surcharge that has been in place for a decade but expires at the end of this year.

That surcharge has funded a pipe replacement program that could end up costing more than $8 billion by the time it wraps up in 2040, nearly six times what the utility estimated in 2007.

In testimony filed this month, CUB slammed Peoples Gas for a “crisis of rising utility costs, fueled by Peoples’ reckless spending in its mismanaged pipeline-replacement program and six straight years of record profits for the company.”

Experts commissioned by CUB say the rate hike can be cut by at least $63 million, including $14 million by reducing the utility’s profit rate of nearly 10% to “a more reasonable” 9.5% — and $9 million by cutting executive bonuses.

CUB says Peoples Gas could cut another $18 million from the hike by lowering its common equity ratio — or the number of stocks it issues to finance infrastructure projects — and an additional $21 million in other financial adjustments.

A Peoples Gas spokesperson dismissed what the utility labeled as CUB’s “incorrect claims.”

“Our rate filing — the first we’ve made in nine years — is meant to ensure ongoing safety, reliability and environmental sustainability in Chicago,” the spokesperson said in an email. “If approved by state regulators, our request is not expected to increase the typical customer’s bills from last year. … We will file a detailed response to CUB’s filing in the coming weeks.”

CUB said it expects Illinois Attorney General Kwame Raoul’s office to file testimony with the commerce commission seeking an additional $49.2 million in cuts to the Peoples Gas hike request, for a combined total of more than $112 million — more than a quarter of the utility’s ask.

Raoul’s office didn’t have any immediate comment.

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