Draft Peoples Gas decision breaks rate hike record by $100 million

Five Pritzker-appointed commissioners to make final decision in November

In a draft decision released Friday, an administrative law judge granted Peoples Gas a $350 million rate increase, more than $100 million greater than the largest Illinois gas utility rate hike ever before granted. The draft order authorizes $311 million in annual Peoples Gas profits, almost tripling the current authorized level. After setting record profits for the past six years, the most Peoples Gas has profited in a single year was $208 million in 2022. 

The Proposed Order is not final. Consumer advocates and other parties to the case have a final opportunity to argue for changes before the five-member Illinois Commerce Commission issues a Final Order in November. As of this year, the Commission is composed entirely of Gov. J.B. Pritzker appointees for the first time. In a March column in the Chicago Sun-Times, Gov. Pritzker said he wanted to “hold gas utilities accountable and protect consumers.” 

The newly constituted commission has demonstrated on multiple occasions this year that it is prepared to take a more proactive, pro-consumer approach, ordering Peoples Gas to issue a $15 million refund to its customers in May and rejecting $31 million of infrastructure spending by suburban utility Nicor Gas in June. In both instances, the Commission overruled the judge’s Proposed Order. 

The rate hike comes as the “QIP” law that has fueled large gas utility rate increases and shielded Peoples Gas from accountability expires at the end of 2023.

Among many other issues being litigated in the case, the Proposed Order:

• Does nothing to immediately address the failing Peoples Gas pipe replacement program, the budget for which has ballooned from up to $2 billion to $11 billion. Consumer and environmental advocates, along with the Office of the Attorney General, are calling on the Commission to enact immediate reforms, while also launching an in-depth investigation of the troubled program. Instead, the Proposed Order would require Commission staff to draft a report with recommendations within 6 months. 
• Does nothing to rein in unnecessary and wasteful Peoples Gas spending going forward — the very spending that has led to this historic rate hike. Consumer and environmental advocates, along with the Office of the Attorney General and the City of Chicago, proposed a number of policies that would bring Peoples Gas spending under more scrutiny going forward. Instead of considering those specific policy proposals, the Proposed Order postpones consideration of them until an upcoming “future of gas” proceeding.
• Rejects almost all of the proposals made by the Office of the Attorney General to disallow tens of millions of dollars of unjustified Peoples Gas spending.

In more positive outcomes for consumers, the Proposed Order adopts a slightly lower profit rate than that proposed by Peoples Gas. The slightly lower profit rate is the primary reason the Proposed Order drops the rate hike from just over $400 million to $350 million. The Proposed Order also rejects the utility’s proposal to raise its fixed monthly charge to about $45 per customer. Instead, the order maintains the current fixed monthly charge of about $31, despite arguments from many parties that it should be even lower. High fixed charges discourage energy efficiency and conservation and increase affordability burdens. 

In response to the Proposed Order, Illinois PIRG Director Abe Scarr said:

“As Governor Pritzker wrote in March, it’s time to hold gas utilities accountable and to protect consumers. While the Proposed Order fails to meet the moment, the members of the Illinois Commerce Commission have the opportunity to take stronger action. 

“The misguided utility policies of the past decade and the failure of previous commissions to exercise their authority essentially locked in a historically large rate hike. But the commission has other tools at its disposal, and it should use them now, rather than kicking the can down the road. 

“That means implementing immediate reforms to the failing Peoples Gas pipe replacement program and subjecting future Peoples Gas spending to heightened scrutiny, especially as city, state and federal policies increasingly call for a transition off the gas system in the coming decades.”