Governor Pritzker supports our campaign to hold gas utilities accountable. A recent report from Peoples Gas shows why this is important.

On Friday, August 20, Governor Pritzker released a set of new energy principles for Illinois, “Eight Principles for a Clean & Renewable Illinois Economy.” Much of the attention surrounding the announcement has been on proposals to hold ComEd and Exelon more accountable, which is understandable, given the current scandal. But, the announcement also included support for a policy Illinois PIRG has been advocating for years: ending the 2013 law granting a bill surcharge that Peoples Gas and other gas utilities are using to spend billions of dollars outside of the normal regulatory process. [1]

Because of the Governor’s announcement, ending the 2013 law may now be on the table for the fall veto session. A recent Peoples Gas report highlights one reason why this is so important. 

Peoples Gas 2020 Second Quarter Report

On August 14, Peoples Gas released its Peoples Gas Second Quarter System Modernization Program Report. The System Modernization Program is what Peoples Gas calls its pipe replacement work — including both the company’s work to retire dangerous gas mains as well as a full system overhaul. The second quarter report highlights problems stemming from Peoples Gas’ concerning failure to adopt project management best practices. Without changing the 2013 law however, precedent at the Illinois Commerce Commission means the Commission has little power to enact reforms. [2]

The Peoples Gas’ pipe replacement program has suffered from management problems since its acceleration in 2011. An outside audit in 2015 found that management could not explain overall program costs, duration of work, or why leak rates had not fallen after years of accelerated replacement work. [3]

For a project of any scale, basic project management best practices are to have a proper schedule and budget (and for some parts, a necessary order of events — we can’t publish this blog before writing it). Each portion of work has a place in the schedule and a corresponding budget; if the order of projects is changed, it doesn’t just change the timing, but the spending as well. Peoples Gas does report on its work this way. Rather, the company merely reports on total levels of spending and per work product (e.g., miles of installed main). This manner of reporting fails to be meaningful when work is changed but the metrics that work is compared to does not. This is one reason it is so problematic that Peoples Gas has not adopted either a long-term schedule of work nor a credible budget. Instead, Peoples Gas has a “rolling three year plan” which it redoes every year. [4]

Of course, Peoples Gas’ field work has been impacted by the pandemic like everything else. Peoples Gas largely suspended moving gas meters from inside customers’ homes to outside, as that requires entering customers’ homes. [5] Peoples Gas is also in a position to do more pipe replacement projects downtown while foot and vehicle traffic are lower, making the work easier for the company and less of a hassle to people working, living, and visiting downtown. [6]

Work downtown is typically more costly than work in neighborhoods. [7] As such, because Peoples Gas is swapping more expensive work in for less expensive work, it’s reasonable to expect impacts on both the quarterly and annual budgets. Similarly, replacing a mile of pipe may take longer downtown than it does in a neighborhood and one may expect impacts on miles of pipe replaced for the quarter or year.

Given these big changes in plans, comparing the work completed this year to the original annual plan tells one very little. To know if the work downtown is being completed in a timely and efficient manner, regulators and stakeholders need to know the original time and budget expectations for that specific downtown work, even if it was planned to be completed years later according to the original master schedule.

To evaluate a utility’s investments, and whether or not customers are getting value, it’s never enough to know what work got done and how much it cost. One must be able to compare work product and costs to how much work should have been done, how much it should have cost, and whether the utility could have gotten the same or better value from alternative investments. 

This evaluation is always critical, but even more important given the well established management problems of the Peoples Gas pipe replacement program. [8] Because Peoples Gas has stuck with its “three year rolling plan” and non-credible budget estimate, such evaluation is currently not possible, and that’s a big problem for Chicago.

It’s no secret that the utility’s pipe replacement program raises serious concerns, from ballooning costs to investing in gas infrastructure when climate science tells us it’s time to shift to heating our homes with renewable energy. Unfortunately, when, under previous leadership, the Illinois Commerce Commission had the opportunity to enact meaningful reform, it chose not to, saying that its hands were tied by the state law we’ve been campaigning to end. [9] Until the law changes, we expect the Commission to stick with that precedent. 

That’s why changing the law has been the focus of our campaign to reform the Peoples Gas pipe replacement program. With Governor Pritzker’s help, we may be able to change the law this year.

Notes:

[1] Section 2, Proposal 3: https://www2.illinois.gov/IISNews/21974-Putting_Consumers_Climate_First-…

[2] See the Staff of the Illinois Commerce Commission Response to the Final Kiefner Report, August 17 2020, page 15. Available https://www.icc.illinois.gov/docket/P2018-1092/documents/302293

[3] Final Report on Phase One of an Investigation of Peoples Gas Light and Coke company’s AMRP, The Liberty Consulting Group, 5/5/2015, ES-1. https://www.icc.illinois.gov/programs/natural-gas-investigations

[4] As ordered in ICC Docket 16-0376, Final Order, 210. https://icc.illinois.gov/docket/P2016-0376/documents/262806

[5] The Peoples Gas Light and Coke Company, System Modernization Program ICC 2020 2nd Quarter Report. August 14, 2020, 6. Available at https://www.icc.illinois.gov/docket/P2016-0376/documents/302236

[6] Ibid, 2.

[7] Ibid, 6.

[8] We discuss this at length in our 2019 report, Tragedy of Errors: Scarr, Abraham and Orcutt, Jeff, Tragedy of Errors, Illinois PIRG Education Fund and Chapman Energy Strategies, June 2019. Available here: https://illinoispirg.org/sites/pirg/files/reports/Tragedyoferrors_scrn.pdf

[9] ICC Regular Open Meeting Minutes, 1/10/18, 50. Available: https://www.icc.illinois.gov/home/open-minutes