Experts identify fundamental flaws in Peoples Gas pipe safety approach

Testimony sponsored by Illinois PIRG, Attorney General, and Chicago recommend overhaul of troubled pipe replacement program

Illinois PIRG filed expert witness testimony on Tuesday detailing multiple fundamental errors in Peoples Gas’ methods of prioritizing risk reduction to protect public safety. The testimony was among several filed by Illinois PIRG, the Office of the Illinois Attorney General, the City of Chicago, Gas Workers Local 18007, and the staff of the Illinois Commerce Commission (ICC) as part of an ICC investigation into the Peoples Gas program to replace hundreds of miles of risky underground iron gas pipes, known as the System Modernization Program (SMP). 

The expert analysis sheds new light on why the SMP, launched in 2011, has failed to accomplish its public safety objectives despite Peoples Gas spending billions of dollars, leading to the largest gas utility rate hike in Illinois history. 

“Peoples Gas and its allies have falsely claimed that the Illinois Commerce Commission put Chicagoans’ safety at risk by holding the utility accountable,” said Illinois PIRG director Abe Scarr. “Our expert testimony makes it crystal clear that it is Peoples Gas and its faulty approach – not those calling for reform – that is failing to effectively address safety risks.”

To fix these errors, economist Dr. Jonathan Lesser and engineer Dr. Charles Feinstein recommended a methodology which would allow Peoples Gas to optimize investment to reduce risk. The transparent, reproducible methodology can achieve greater risk reductions while costing Chicagoans less. Versions of the methodology have been adopted by multiple other utilities and California utility regulators.

Echoing critiques Illinois PIRG has made for years, experts hired by the Office of the Attorney General and City of Chicago also concluded:

• Peoples Gas cannot be relied upon to accurately forecast SMP costs;
• The SMP’s current program prioritization unduly relies on non-safety considerations; 
• The Commission should narrow the SMP’s bloated scope to focus on removing high risk pipes, rather than broader “system modernization;” and
• The SMP should be subject to heightened and ongoing oversight going forward.

Illinois PIRG’s other expert witness, Mark Kleinginna, has over 35 years experience in the energy industry, including working for a gas utility. His testimony presents recommendations for changing SMP program management and for considering alternative investments Peoples Gas could adopt in light of the potential transition off the gas system, which the ICC is studying through its Future of Gas proceeding.

As Illinois PIRG Education Fund documented in its 2019 report, Tragedy of Errors, Peoples Gas has failed to properly prioritize the replacement of risky iron pipes in its system for over four decades. The modern version of the program, the SMP, has been beset by delays, cost overruns, and failures to reduce pipeline failure rates. 

Despite this, the previous leadership of the ICC declined to reform the program at the conclusion of a two-year investigation in January 2018, claiming its hands were tied by a state law. With that state law set to expire at the end of 2023, Peoples Gas filed a rate case in January 2023. At the conclusion of that proceeding in November 2023 the ICC paused the SMP and initiated a new investigation into the program. A recently concluded rehearing of the rate case reinforced concerns with management of the SMP.

The investigation is expected to conclude by January 2025. As of last year, all five members of the ICC were appointed by Gov. J.B. Pritzker.

“The Illinois Commerce Commission should take this opportunity to overhaul the Peoples Gas pipe replacement program to reduce costs and better ensure public safety,” concluded Scarr. “Doing so will allow us to stop wasting money on unnecessary fossil fuel infrastructure and instead work toward safer, cleaner ways to heat our homes.”