Gas utility rate hike: What does it mean for me?

If you are a customer of one of four major gas utilities in Illinois, your gas bill is about to change. After an 11 month process, the Illinois utility regulator, the Illinois Commerce Commission, made decisions on gas utility rate hike requests filed by Ameren Gas, Nicor Gas, Peoples Gas, and North Shore Gas. Even though our gas bills will be going up, the Commission significantly lowered all four rate hike requests. 

The Commission made several other important decisions, including: halting the troubled Peoples Gas pipe replacement program and putting it under formal investigation, approving a new low-income discount rate, requiring all of the companies to participate in a proceeding considering the future of gas utilities given state goals to transition off of fossil fuels, and creating a new, transparent planning process that will help rein in future wasteful utility spending.

How big is the rate hike?

The Commission approved a rate hike for all four utilities, but at lower amounts than requested in all four cases. See each company’s newly approved revenue amount below.

When do the new rates go into effect?

Ameren’s new rates go into effect November 28, 2023. Nicor and Peoples Gas’ new rates go into effect December 1, 2023. North Shore Gas has not filed the documents to know when the new bills will go into effect. We will update this when they do.

How else will the gas utility rate hike affect my bill?

Beyond changing the overall level of bills, the rake hike changes aspects of how you are billed, through the fixed customer charge and the volumetric distribution charge. 

The fixed customer charge is the amount you pay each month to be connected to utility service, regardless of how much gas you use. The volumetric distribution charge varies based on how much gas you use – you pay a standard rate per therm of gas you use. The more gas you use, the higher your bill will be. 

Photo by Peoples Gas | Public Domain

Across the board, the Commission approved lower fixed customer charges than requested by the utilities, and for all but Ameren, the new fixed customer charge will be lower than under prior rates. Volumetric distribution rates are going up for all utilities. Generally speaking, this will mean that bills will be higher in the colder winter months when people use more gas, and lower in the summer when the heat is off. 

Paying more through volumetric charges allows customers to better control their bills by lowering their gas use. This can be accomplished through weatherizing your home, buying more energy efficient appliances, or simply through conservation. Learn how you can save money on your bill with our Citizen’s Guide to Reducing Energy Waste.

Why did the Commission pause Peoples Gas’ pipe replacement program?

The Commission concluded that Peoples Gas had failed to justify the cost of and plan for its pipe replacement program. The Commission therefore cut the program’s budget to zero, and paused the program pending further investigation. 

Peoples Gas claims that the central focus of its program is to replace aging, high risk pipes. However, reports made to the Commission indicate that high risk pipe replacement has been delayed by “system modernization” activities. Reviews of leak rates show that the Peoples Gas system has either not improved or has worsened over the course of the replacement program, despite billions of dollars invested.

The Commission calculated that, at the current rate of work, it will take Peoples Gas an additional 26 years to replace the existing high-risk pipe. A 2021 Peoples Gas engineering study recommended retiring all high risk pipes by 2030. Peoples Gas provided no explanation on the steps it would take to meet the suggested timeline nor did the company explain how it planned to spend the $265 million it requested for the program.

The Commission therefore determined that a separate proceeding is necessary to fix problems with the pipe replacement program going forward.

Does the pause on Peoples Gas’ pipe replacement program put public safety at risk?

No, a pause on the program does not negate Peoples Gas’ responsibility to maintain a safe gas system. The Commission was explicit that it expects the utility to continue to address existing and new leaks as it would in the normal course of prioritizing customer safety.

What is the low income discount rate?

The Commission approved a new low-income discount rate that will provide lower-income customers with a discount on their entire bill. All other customers will pay a small amount more to pay for this discount.

This discount rate applies to customers whose incomes are up to 300 percent of the Federal Poverty Level (FPL) (which is $30,000 annual income for a family of four in 2023) or if your gas bill is greater than 3 percent of household income, with five tiers of discounts for eligible customers, based on income level.

The Commission is requiring all companies to implement the new discount rate by October 1, 2024 in preparation for the 2024/2025 winter heating season.

You can find more information about how to save money on your bill here.

What is the “Future of Gas” proceeding?

Over the coming decades, we need to stop burning fossil fuels if we are going to achieve Illinois’ climate goals. Given that, the Commission acknowledged that the gas system will need to change. In order to investigate what that means, the Commission ordered a “Future of Gas” proceeding to commence next year.

Many consumer and environmental organizations believe that we need to transition to all-electric buildings powered by 100 percent renewable energy. The gas utilities are arguing for continuing to use their gas distribution system, with a number of changes to lower climate emissions – for example by complementing the methane gas we currently burn with hydrogen or so-called “renewable natural gas.” 

This proceeding will provide the utilities, the Commission, and stakeholders the opportunity to evaluate potential future pathways in terms of cost, viability, and effectiveness in reducing carbon emissions. The results will provide a foundation for state level policy change and the long-term infrastructure plans the Commission is requiring the utilities to submit.

What is the long-term infrastructure plan?

Ameren, Nicor, Peoples Gas, and North Shore will be required to file a public long-term infrastructure plan with the Commission every two years beginning July 1, 2025. The current lack of a transparent planning process makes it hard for the Commission, customers, and other stakeholders to determine whether the utilities are prioritizing appropriate investments – or are investing in ways that drive up utility profits without appropriately benefiting customers. The long-term infrastructure plans will be considered through formal proceedings, allowing the Commission to make changes to the companies’ plans.

These plans must include the utilities’ proposed system investments, detailed information on all planned projects, justification for the time, cost, and location of each project, and an explanation of how the company incorporated stakeholder engagement. Each company must also file a work plan at least 12 months prior to the infrastructure plan that outlines the content of the plan, the method for assessing potential resources, and the timing and extent of public participation.

How much profit will the utility companies make?

Because utilities are regulated monopolies, some of the key decisions regulators make concern profit levels. Increases in profits can contribute significantly to a rate hike request. Under traditional regulation, when the Commission authorizes a profit level, that does not guarantee the utility will actually make that amount in any given year, as fluctuations in revenues and expenses will impact actual profits.