Average Peoples Gas customer paying more than $13 per month for mismanaged pipe replacement program

Legislature takes no action to address ballooning surcharge, despite legislative proposal from Gov. Pritzker

Illinois PIRG Education Fund

Peoples Gas released a second quarter report Friday on its troubled pipe replacement program. The report shows that the average Peoples Gas customer paid a $13.14 monthly surcharge for the program over the past quarter — more than eleven times the $1.14 per month the legislature was told customers would pay when it passed a law authorizing the surcharge in 2013. In June, the surcharge accounted for 17 percent of the average customer’s bill, almost as much as the cost of the gas itself.  

The surcharge, granted to gas utilities two years after ComEd won automatic “formula” rate hikes at the beginning of its bribery scheme, operates like a formula rate for more than half of Peoples Gas’ annual capital spending, providing guaranteed profits and minimal regulatory oversight. 

Gov. JB Pritzker proposed ending both the gas surcharge and formula rates for ComEd and downstate utility Ameren in omnibus energy legislation released in April, but those and other consumer-friendly policies were not included in the drafts of negotiated legislative language circulated in late May and early June. The ratemaking provisions in those drafts could even be more profitable for ComEd and expensive for its customers. Legislative leaders recently indicated that the legislation, which has stalled over disputes between labor and environmental coalitions, may be voted on before the end of August.

“It’s time to end automatic gas utility surcharges forcing Chicagoans to pick up the tab for this failing program and shielding Peoples Gas from accountability,” said Illinois PIRG Education Fund Director Abe Scarr. “Illinois needs to marshall all its resources to reach our climate and clean energy goals, not waste billions of dollars on mismanaged fossil fuel infrastructure projects and excess utility profits.”

The program remains behind schedule, retiring only 26 miles of gas mains so far this year, 35 percent less than what Peoples Gas planned to. It was also once again over budget: the overall program has cost $124.6 million so far this year, $4.5 million per mile of pipe retired, which is 34 percent more than planned. This marks the fourteenth consecutive quarter that the program has been behind schedule and over budget, every quarter since the company began reporting quarterly in 2018. 

In contrast, over the entire year in 2006, Peoples Gas spent $50 million in 2021 inflation-adjusted dollars to replace 47 miles of main at a relatively scant $1 million per mile retired.

The program is driving a home heating affordability crisis in Chicago. While all major utilities have seen increases in customer debt this year because of the pandemic, the stark differences between Peoples Gas and others highlights the severity and chronic nature of its affordability problems. For example, Peoples Gas customers with debt were collectively $146.5 million behind on their bills as of January 2021. That is $26 million more than ComEd customers, despite ComEd having roughly 2.9 million more residential customers.

Gov. JB Prtizker and Attorney General Kwame Raoul have supported legislation to end the surcharge Peoples Gas is using to recover costs of the pipe replacement program. That followed calls from Chicago Mayor Lori Lightfootfoot and the Chicago City Council for the state to take action. The policy change is supported by a coalition of more than 30 consumer, environmental, and community organizations.

An engineering study released last year echoed previous outside reviews of the program, finding that the program was failing to achieve its purported purpose of protecting public safety 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.”

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. The reasons? 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 at: https://illinoispirg.org/feature/ilp/tragedy-errors