Regulators slash Peoples Gas’ request to add $7.9M to record-breaking customer bill increase

Commissioners criticize Peoples Gas for repeated failure to justify rate increase requests

Utility regulators at the Illinois Commerce Commission voted unanimously on Thursday to slash Chicago gas utility Peoples Gas’ proposal to add an additional $7.9 million to its record breaking $303 million rate hike. Instead the commission approved a $1.6 million increase for emergency work out of “an abundance of caution.” In announcing the decision, commissioners criticized Peoples Gas for its repeated failure to justify its rate increase requests.

“We thank Chair Scott and commissioners for once again protecting Peoples Gas customers and restoring much-needed utility accountability,” said Illinois PIRG State Director Abe Scarr. “Not only did Peoples Gas fail to justify yet another rate hike, this proceeding provided further evidence that the Peoples Gas pipe replacement program is profoundly troubled, reinforcing why the commission’s investigation is critically important.” 

In November, as part of a broader rate case decision, the commission paused the SMP, opened a special SMP investigation, and cut the SMP’s $265 million 2024 budget to zero. 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. 

Rather than complying with the scope of the rehearing, which the commission limited to SMP “work in progress” and work to address emergencies, Peoples Gas proposed “Emergency, Safety, and Reliability” work. The utility admitted to creating this category, which included significant non-emergency work, solely for the rehearing.

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 $303 million rate hike the Commission approved in November. 

Rather than approve the full $145 million budget restoration, the Commission approved restoring $28.5 million for emergency work out of “an abundance of caution,” as recommended by the office of the Illinois Attorney General. In its legal briefs in the case, Illinois PIRG advocated for no budget or rate increase, but did not object to the Attorney General’s recommendation. This budget restoration will result in a $1.6 million increase to customer bills.

Further evidence in the rehearing showed:

• Peoples Gas has an over-expansive definition of emergency work that includes significant work that cannot reasonably be considered “emergency.” 
• 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. 
• The projects Peoples Gas presented as “in-progress” varied significantly from its presentation of in-progress work just months earlier in the original rate case. 
• Peoples Gas initiated new SMP projects after the commission’s ordered pause of the program, in apparent violation of the commission order, and then sought to raise rates for those “works in progress.”

Executives of the Peoples Gas parent company have previously stated they intend to appeal the commission’s rate case decision in court. 

The commission will now turn its attention to the SMP investigation. For years Illinois PIRG has argued that the program is mismanaged and failing to cost-effectively address the risks posed by aging iron pipes in the Peoples Gas system. 

Peoples Gas filed its initial testimony in the investigation in April, 2024. Illinois PIRG and other parties will file initial expert witness testimony in mid-June. The investigation will conclude by early 2025.