Illinois PIRG to regulators: Reject Peoples Gas’ request to increase record-breaking rate hike by nearly $8M

Case rehearing reinforces need for thorough investigation of troubled pipe replacement program

Illinois PIRG is urging utility regulators at the Illinois Commerce Commission to reject Peoples Gas’ proposal to increase its record-breaking rate hike by an additional $7.9 million. In a legal brief filed Wednesday, the consumer group argues that Peoples Gas should continue to address bonafide emergencies and finish in-progress projects in its paused pipe replacement program, but that the commission should not authorize related increases to customer bills until the Chicago gas utility does more to justify this work in its next rate hike request.

“What we’ve learned in this rehearing reinforces why the Commission pause and investigation of the failing Peoples Gas pipe replacement program is so important,” said Illinois PIRG State Director Abe Scarr. “New evidence shows that much of what Peoples Gas claims is emergency work is not an emergency, that the utility has been flagrantly flouting critical City of Chicago planning and coordination rules, and that we urgently need the investigation to understand and correct the utility’s prioritization of work to keep its aging pipe system safe.”

In November, as part of a broader rate case decision, the commission paused the Peoples Gas Safety Modernization Program (SMP), opened a special SMP investigation, and zeroed out the SMP’s $265 million 2024 budget. The commission found that the utility failed to provide evidence supporting the SMP budget and failed to answer direct questions from the commission regarding the program. The commission expressed concerns that the program is failing to adequately prioritize risk reduction. 

Peoples Gas did not inform the commission and the public until after the rate case concluded that its SMP budget included its budget for emergency repairs and other routine gas utility maintenance activities. It did so through a motion for clarification and campaign to pressure the commission to reverse course. The commission dismissed that motion as procedurally inappropriate. 

Peoples Gas then petitioned for a rehearing, which the commission granted in early January. The commission limited the scope of the rehearing to whether and to what extent emergency work is part of the SMP, whether Peoples Gas should be permitted to complete in-progress SMP projects despite the overall pause on the program, and whether Peoples Gas should be allowed to raise customers’ bills this year for that work. 

Rather than complying with the limited scope of the rehearing, Peoples Gas proposed not only emergency but “Emergency, Safety, and Reliability” work, a category including significant non-emergency work and which the utility admitted to creating solely for the rehearing. The projects it presented as “in-progress” also varied significantly from its presentation of in-progress work in the original rate case. Overall, Peoples Gas asked the commission to restore $145 million of its $265 million 2024 SMP budget. That would result in a $7.9 million annual increase in customer bills, on top of the $300+ million rate hike the Commission approved in November. 

Subsequent evidence in the rehearing showed:

• Testimony from a panel of gas engineers hired by the Office of the Attorney General as well as testimony from a deputy commissioner of the Chicago Department of Transportation (CDOT) found that Peoples Gas has an over-expansive definition of emergency work that includes significant work that cannot reasonably be considered “emergency.” 
• The CDOT testimony further described how Peoples Gas has used its over-expansive definition of emergency work to bypass critical city planning and coordination rules that are in place to save money, minimize disruption to city residents and businesses, and promote public safety. 
• After the commission imposed the pause on November 16, Peoples Gas initiated new SMP projects, in apparent violation of the commission order. The utility now seeks to raise rates for those “works in progress.”
• Numerous details about reliability, safety and ongoing neighborhood level pipe replacement programs reinforce ongoing concerns about the utility’s prioritization of work to address safety risks in its aging pipe system.

Parties to the case will file reply briefs on April 10, after which an administrative law judge will issue a draft decision in early May. A final decision from the commission is expected at the end of May. 

On Monday, Peoples Gas filed its initial testimony in the SMP investigation. That investigation will conclude by early 2025.