Testimony before the House Public Utilities Committee in support of House Bill 3941

In 2013, the General Assembly passed Public Act 98-57, which allows Ameren Gas, Nicor, and Peoples Gas to accelerate cost recovery by automatically raising customer bills through a bill surcharge, known as Rider QIP, to pay for certain types of infrastructure investment. The rider is scheduled to sunset December 31, 2023. House Bill 3941 would move that sunset date forward by one year, to December 31, 2022. The case for doing so is significant.

Chairperson Walsh, Vice Chairperson Delgado, Spokesperson Wheeler, honorable members of the committee: thank you for the opportunity to testify today. My name is Abraham Scarr and I am the Director of Illinois PIRG. Illinois PIRG is a statewide, citizen funded, non-partisan public interest advocacy organization that speaks out for a healthier, safer world in which we’re freer to pursue our own individual well-being and the common good.

I wish to start by thanking Representative Mason for her ongoing leadership on this issue, Governor Pritzker for his support, and the 36 organizations who have come together to call on the General Assembly to end wasteful gas utility spending and rate hikes facilitated by Rider QIP.

We strongly support House Bill 3941 and encourage the committee to support it.


In 2013, the General Assembly passed Public Act 98-57, now 220 ILCS 5/9-220.3, which allows Ameren Gas, Nicor, and Peoples Gas to accelerate cost recovery by automatically raising customer bills through a bill surcharge, known as Rider QIP, to pay for certain types of infrastructure investment. 

The rider is scheduled to sunset December 31, 2023. House Bill 3941, as amended by House Committee Amendment No. 1, would move that sunset date forward by one year, to December 31, 2022. 

The case for doing so is significant:

  • Wasteful utility spending incentivized by Rider QIP is hiking customer bills. Average Peoples Gas customers are paying more than $13.50 per month on the surcharge. Over the past four years, because of Rider QIP among other factors, Ameren Gas has raised delivery rates by 27 percent and Nicor by a remarkable 77 percent. This is leading to an affordability crisis in Chicago and increasing affordability problems around the state. 

  • The utilities cannot justify accelerated investments based on safety. The committee will hear a lot from the utilities and their allies about how these investments are necessary for safety. What you will not hear is any evidence of why this level of spending, at this accelerated pace, is necessary to address any specific safety risk. 

    • An outside audit published in May 2015 and an engineering study published in January 2020 both found that the Peoples Gas System Modernization Program (SMP) is failing to address system safety in any proportion to the billions of dollars invested. The SMP is designed as a full system overhaul, not a targeted risk-reduction program.  

    • Both Ameren and Nicor have zero remaining cast iron pipe in their system, a primary justification for accelerated pipe replacement. Analysis of Ameren and Nicor leak rates compared to all national and to a collection of peer utilities demonstrate both are relatively low risk systems. The federal Maximum Allowable Operating Pressure regulations do not justify the level or pace of transmission investments the utilities are making.

    • In regulatory filings, the utilities fail to provide specific and compelling safety justifications for their investments. Rather, they simply state that the investments qualify under the law for Rider QIP recovery.

  • Based on structure and precedent, Rider QIP shields utilities from meaningful regulatory oversight. 

    • Out of the more than $4 billion the utilities have spent under QIP, not a single cent has so far been disallowed by the Commission. [1]

    • In ICC Docket No. 16-0376, an investigation into the Peoples Gas pipe replacement program costs, which are largely recovered through Rider QIP, the Commission concluded that the law “tied its hands” to enact reforms to the program. This conclusion came despite a damning outside audit that found that Peoples Gas management could not say how long the program would take, what it would cost, or why it was not reducing leaks in proportion to spending, as well as an admission from then-Chairman Sheahan that “the long-term annual costs that [Peoples Gas has] proposed will cause too great a burden for too many households in Chicago.” [2]

  • The legislature approved Rider QIP based on misleading information. For example, legislators were told that the average monthly bill impact for Peoples Gas customers would be $1.14, or $13.68 per year. In September 2021 alone, the average Peoples Gas customer paid $13.63. Legislators were told that Ameren would spend $330 million. Ameren has already spent more than $832 million.

  • Accelerated investment in fossil fuel infrastructure does not make sense as Illinois works to address climate change. Climate science indicates that we should stop burning gas to heat our homes by 2050. Some municipalities no longer allow new home construction to connect to the gas system. While utilities should invest in their system to maintain safety, so-called “modernization” programs are highly questionable and could leave Illinois consumers with significant stranded assets.

  • Reasonable and prudent investments can continue. Ending the rider does not end investment – it ends immediate and automatic cost recovery, that is, immediate and automatic monthly rate hikes increasing customer bills. If the utilities’ investments are in fact reasonable and prudent, there is no reason they cannot continue making investments and recovering the costs thereof under traditional regulatory oversight.

These negative outcomes are a direct result of the QIP policy, enacted by the Illinois General Assembly, which supercharges the utility incentive to spend money to make money by removing counterbalancing regulatory tools.

My organization has campaigned for years for the reform of the Peoples Gas pipe replacement program and end Rider QIP. With my testimony today, I will focus on Nicor’s use of QIP.


Since QIP started in 2015, Nicor’s capital spending, and delivery rates, have skyrocketed.

Nicor recently raised delivery rates for the third time in four years. With the most recent rate hike, Nicor’s rates have risen by 77 percent in four years, after rising by only 28 percent over the previous 37 years.


Rate increases are usually driven by increasing the value of the assets utilities use to provide service, the “rate base.” This is done by making capital investments faster than the rate of depreciation. Increasing its rate base is also a primary way a utility can increase its profits.

Nicor’s capital spending sharply increased starting in 2015, the same year it began using Rider QIP.

Spending recovered by QIP is not the only cause for this steep increase in capital expenditures, but is a major contributor.  Between 2015 and 2020, QIP accounted for 49 percent of Nicor’s capital expenditures. 

Again this demonstrates that spending recovered by QIP is not the only reason for the major increase in capital expenditures – and sharp rate hikes – but a major contributor. 2015 is also the year Nicor was acquired by Southern Company, and the aggressive capital spending could also be a profit strategy by Nicor’s new parent company.

This level of spending is much higher than Nicor historically spent in the categories of spending covered by QIP, and more than Nicor told the Commission it planned to spend when seeking approval to use the QIP rider. [3]

Over a 5 year historical period before QIP, Nicor spent an average of $83 million per year in the categories covered by QIP. Nicor told the ICC they planned to spend an average of $172 million per year over the first 3 years of QIP.

Between 2015 and 2020, Nicor has actually spent an average of $313 million through QIP per year, 3.7 times the historical rate and 1.8 times the rate it told the Commission it planned over the first three years of QIP. Over the past three years Nicor has averaged $357 million per year, 4.3 times the historical rate and twice what it told the Commission it planned over the first three years of QIP when seeking approval to use QIP.

Nicor lacks a safety justification for this aggressive spending

Rider QIP is purportedly about safety, a response to the 2010 San Bruno gas explosion and a “Call to Action” from the federal Pipeline and Hazardous Materials Safety Administration (PHMSA) to accelerate replacement of risk prone pipe, primarily but not exclusively aging cast iron pipe.

Nicor replaced its last cast iron main in 2018.  Nicor replaced its cast iron main for decades, mostly before it accelerated its capital spending through QIP, without raising rates. (Data is missing for several years, which explains the break in the main miles line).

This chart shows how Nicor’s acceleration in capital spending does not coincide with a significant increase in the pace of pipe replacement. Between 1982 and 2013, Nicor replaced 786 miles of cast iron main – without a major rate hike or special cost recovery mechanism. If it had kept its pre-QIP pace, Nicor would have eliminated cast iron pipe by 2020, only two years later than they did with QIP – and without huge rate hikes.

Nicor has spent more than $1 billion in categories recovered through QIP since it replaced its last cast iron main in 2018. The year after all its cast iron pipes were removed, 2019, was the highest year of Nicor’s QIP and total capital spending. 

Analysis of system leaks reported to PHMSA provides further evidence that Nicor’s system is relatively safe and not in need of accelerated investment.  

The chart shows annual leaks per mile of main as reported to PHMSA, comparing Nicor to all gas utilities, a set of peer utilities, and some of the most-leak prone utilities. Clearly, Nicor’s system is relatively safe.

What is Nicor spending all this money on then? Primarily, transmission.

This chart breaks down the 7 QIP categories into three larger categories of spending – transmission, distribution, and over-pressure protection. One can see the increasing spending on transmission, especially in recent years.

Nicor and other gas utilities justify their aggressive transmission spending by pointing to a PHMSA rule regarding Maximum Allowable Operating Pressure (MAOP), that is, the maximum pressure in which gas can move through a transmission pipe. 

This rule in no way justifies such massive spending by Nicor or the other utilities.

  • First, this rule is only necessary because the gas utilities themselves failed to keep adequate records of their systems’ capabilities. Customers, not shareholders, are being forced to pay for poor utility operations.
  • Second, there are six approved methods for complying with this regulation, including testing, engineering critical assessment, and reducing MAOP to the pressure of the highest actual five-year operating pressure. The utilities are choosing to apply the method, transmission pipe replacement, that boosts profits, and costs customers, the most.
  • Finally, from when the rule was finalized in 2020, utilities must complete 50 percent of their MAOP reconfirmation miles in eight years (2028) and the remaining 50 percent in 15 years (2035). There is no reason to comply with these regulations on an accelerated basis. 

In Commission regulatory proceedings, Nicor and other utilities do not provide compelling evidence for their spending. The following is the totality of Nicor’s initial high-level testimony supporting the prudence of its 2019 QIP investments. 

As with all its capital investment projects, Nicor Gas takes a systematic approach to prioritizing investments eligible for recovery under Rider QIP. Each project category carries a unique set of characteristics that are evaluated for an array of risks including but not limited to safety, reliability, obsolescence, age and asset integrity, and Subject Matter Expert knowledge. These prioritizations are conducted on both a holistic basis in determining overall investment resources and within each qualifying investment category, to determine the optimal deployment of resources. [4]

Rider for QIP has led to an explosion of spending by Nicor, resulting in record rate hikes. There is no evidence that such spending, and such a policy, is necessary. The Illinois General Assembly should end it.

Peoples Gas

As noted above, my organization has written extensively on the problems with the Peoples Gas pipe replacement program, most notably in our 2019 report, Tragedy of Errors

As others will testify today, Chicago is irrefutably in the midst of a home heating affordability crisis, caused substantially by the costs of the pipe replacement program.

I will to add two comments:

  • Peoples Gas has submitted quarterly reports on its pipe replacement program to the Commission since the beginning of 2018. Over the course of 15 quarterly reports, the Company has struggled to retire its leak-prone pipe, coming in behind schedule and over budget every time.[6] The program still operates without a total budget or firm end-date, two fundamentals of project management. The significant management problems identified by the 2015 Liberty Audit have not been addressed.
  • The 2020 Engineering study does not support continuing on with business as usual, as Peoples Gas argues. In fact, like the Liberty Audit, the engineering study found the program is fundamentally failing to accomplish its purported purpose of protecting public safety by replacing aging cast and ductile iron pipes. The study’s first finding includes: the program “has not coincided with a noticeable reduction in pipeline failure rates – particularly in the last decade.”[7] Unfortunately, the study completely avoids investigating why the program is failing. Instead, it simply recommends that Peoples Gas speed up, working to finish by 2030 instead of 2040. The study also does not consider how Peoples Gas could accomplish such a feat, writing that it did not evaluate “the logistical or financial constraints that could be necessary to support an acceleration.”[8] These critical topics, as well as customer costs, were not included in the study’s scope of work, which was set by Peoples Gas. The study highlights the extent of the harm (urgent need to replace riskiest pipe) from Peoples Gas’ failing program, which the company then touts as a reason for continuing its failing program.

A note on high gas prices

Customers are suffering this winter not only because of delivery rate increases and the QIP surcharge, but also because the price of gas itself is higher than in recent years. It is inaccurate, however, to blame high utility bills on this increase in gas prices alone, as rate hikes and high QIP charges clearly demonstrate.

This winter’s gas prices are not high by historical standards. The following slide is from a presentation the utilities made before the Commission during its November 18th 2021 Winter Preparedness Policy Session.

That is, while consumers are suffering this winter, it could easily get much worse. 

Low gas prices over the last decade have “hidden” rising distribution rates, helping overall bills stay relatively stable despite significant increases in delivery rates and company profits. If delivery rates continue to rise, and gas prices get even higher, consumers will be in for a greater price shock.

There is no reason to be confident that gas prices will stay as low as they are now, or have been in recent years. Low gas prices have been driven by the shale boom, which may be over. A recent Wall Street Journal article was headlined Oil Frackers Brace for End of the U.S. Shale Boom, Limited inventory leaves the industry with little choice but to hold back growth, even amid high oil prices. 

Transitioning to a low-carbon economy will likely drive gas prices even higher. This winter’s “high” gas prices are not high historically, and will likely be low compared to future years.


No one wants utility underinvestment. When utilities fail to adequately maintain their infrastructure, consumers face harsh consequences, from the persistent reliability problems faced by ComEd customers for decades, to wildfires in California, to blackouts in Texas, to deaths and property destruction from gas explosions.

The imperative to ensure safe reliable utility service is one reason utility regulation has historically been structured to incentivize healthy investment through “cost plus” regulation – utilities’ opportunity to profit increases as it invests more in its infrastructure. 

Without proper balance, however, this incentive to spend money to make money can harm the public interest: when utilities overinvest, or “gold plate,” by making investments that boost profits but do not deliver value to customers. 

Unfortunately, over the past decade, through formula rates and Rider QIP, Illinois policy has stripped away regulatory counterbalances, leaving utilities with a supercharged incentive to spend money, and raise delivery rates, as fast as they can.  

That utilities have responded to these incentives with billions of dollars of wasteful spending is not surprising; it is exactly what we should expect. The question now is: how will the General Assembly respond?

Thank you for the opportunity to submit written testimony. I will be happy to answer any questions the committee may have.


[1] Both the 2015 and 2016 QIP reconciliation dockets for Peoples Gas included settlement stipulations which led to refunds from the company. These, however, were agreed to by the Peoples Gas. Not only were these amounts inadequate given the audit findings concerning the time period in question, they do not reflect the ICC looking at any of the egregious spending in question. Rather than the Commission conducting an analysis of what level of penalty the company should receive for its documented failings, the regulators were passive recipients of the company’s agreement. We do not consider this to be a disallowance. It certainly is not a check on massive spending which has led to record profits for Peoples Gas. For Nicor and Ameren, not a single cent has been disallowed for any reason by the Commission.
[2] Minutes, Illinois Commerce Commission Regular Open Meeting, January 10, 2018, 51.
[3] Note, not all the new spending in these categories is recovered by QIP, so the increase is higher than even this simple comparison demonstrates.
[4] ICC Docket No. 19-0294, Nicor Exhibit 2, Whiteside, 5.
[6] See our commentary on the Q3 2021 reporter here: https://illinoispirg.org/news/ilf/home-heating-bills-rise-new-reports-sh…
[7] Kiefner and Associates, Inc. Final Report, Engineering Study of the Cast Iron and Ductile Iron Pipe System to the Peoples Gas Light and Coke Company, January 28th, 2020, (i).
[8] Kiefner and Associates, Inc. Final Report, Engineering Study of the Cast Iron and Ductile Iron Pipe System to the Peoples Gas Light and Coke Company, January 28th, 2020, (ii), and Appendix B, CTR 4 to 5, 8.


Abe Scarr

State Director, Illinois PIRG; Energy and Utilities Program Director, PIRG

Abe Scarr is the director of Illinois PIRG and is the PIRG Energy and Utilities Program Director. He is a lead advocate in the Illinois Capitol and in the media for stronger consumer protections, utility accountability, and good government. In 2017, Abe led a coalition to pass legislation to implement automatic voter registration in Illinois, winning unanimous support in the Illinois General Assembly for the bill. He has co-authored multiple in-depth reports on Illinois utility policy and leads coalition campaigns to reform the Peoples Gas pipe replacement program. As PIRG's Energy and Utilities Program Director, Abe supports PIRG energy and utility campaigns across the country and leads the national Gas Stoves coalition. He also serves as a board member for the Consumer Federation of America. Abe lives in Chicago, where he enjoys biking, cooking and tending his garden.

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