As its failing pipe replacement program puts Chicagoans in debt, Peoples Gas on track for record profits

Illinois PIRG Education Fund

The Peoples Gas pipe replacement program once again ended the year behind schedule and over budget according to a year-end report released Monday. Peoples Gas charged its residential customers nearly $157, on average, for the program in 2021. That has contributed to widespread home heating affordability challenges in Chicago. Despite this, Peoples Gas is on track to make record profits in 2021, surpassing the previous record set in 2020.

“Illinois law is allowing Peoples Gas to fail its way to record profits, and customers are paying the price,” said Illinois PIRG Education Fund Director Abe Scarr. “It’s time for Illinois policy makers to do more than gawk at this slow-motion train wreck and restore accountability to this failing program.”

A 2013 state law provides guaranteed profits and minimal regulatory oversight for certain gas utility infrastructure programs. In 2018, the Illinois Commerce Commission, which regulates utilities, said that the law rendered it powerless to slow down Peoples Gas’ spending on the pipe replacement program, regardless of its inefficiencies, waste, and high cost to consumers. 

Peoples Gas earned a record $187 million in profits in 2020, 113% higher than in 2015. While the utility’s final 2021 profits won’t be public for a few weeks, Peoples Gas reported higher profits at the end of the 3rd quarter of 2021 than it did at the same point in the record-setting 2020.

“Public utilities are private companies with a state-granted monopoly to provide a public good,” continued Scarr. “Our laws and regulations should align their opportunity to profit with the successful provision of safe, affordable, reliable utility service, not force customers to pay more to get less.”

A 2020 engineering study echoed a previous outside audit, finding that the Peoples Gas pipe replacement program was failing to achieve its public safety purpose by rapidly replacing pipes at risk of failure.The study concluded that the program “has not coincided with a noticeable reduction in pipeline failure rates — particularly in the last decade.”

Peoples Gas fell 6% short of its 2021 plan for miles of pipe replaced, while costing 23% more per mile of pipe replaced than planned. This marks the 16th consecutive quarter that the program has been behind schedule and over budget — every quarter since the company began reporting on the project quarterly in 2018. Over those four years, the program has cost almost $1.2 billion.

Those costs, along with the record-breaking company profits, come from the pockets of Peoples Gas customers, who paid a $13.91 surcharge for the program in the month of December alone —  more than the legislature was told customers would pay per year when it passed the law authorizing the surcharge in 2013. 

According to a separate report submitted to the Illinois Commerce Commission Tuesday, 30% of Chicago gas utility customers were assessed a late fee in January, 18% were behind on their bills, collectively $86 million behind. This amount is more than the amount ComEd customers were behind on electric bills, despite ComEd having almost five times as many residential customers. 

Last week, the Illinois House Public Utilities Committee held a hearing on a bill, HB3941 (Mason), that would end the surcharge (read Illinois PIRG’s testimony here). On Tuesday, the bill was sent to subcommittee. The accompanying Senate bill, SB570 (Castro), was assigned to a committee and granted a committee deadline extension on Tuesday.

In his comprehensive energy proposal last year, Gov. JB Prtizker proposed ending the law allowing Peoples Gas and other gas utilities to assess the surcharge and profit off of billions of dollars of infrastructure spending with limited oversight. Chicago Mayor Lori Lightfoot and the Chicago City Council have also called for the state to take action. The policy change is supported by a coalition of 36 consumer, environmental and community organizations.

Illinois PIRG Education Fund has argued for years that the program is failing to reduce system risk in proportion to the billions of dollars Peoples Gas is spending for two main reasons. First, Peoples Gas is prioritizing an overhaul of its system from low to medium pressure over replacing at-risk pipes. Further, Peoples Gas has chronically mismanaged the program. Access Illinois PIRG Education Fund’s detailed report on the program’s “tragedy of errors” at:https://illinoispirg.org/feature/ilp/tragedy-errors