Years of Failure: With record-breaking rate hike pending, Peoples Gas pipe-replacement program once again over-budget, behind schedule

Media Contacts
Abe Scarr

State Director, Illinois PIRG; Energy and Utilities Program Director, PIRG

As Peoples Gas pulls in record profits and pushes for an unprecedented rate hike, the Chicago gas utility’s pipe-replacement program failed to hit its goals for the 22nd consecutive quarter, according to a report it submitted to state regulators this week. The program also ended the quarter over-budget, as it’s been every year since quarterly reporting began in 2018. 

The mismanaged program — with cost projections that have skyrocketed from $2 billion to up to $11 billion — is the primary driver of Peoples’ record-breaking $402 million rate-hike request currently pending before the Illinois Commerce Commission. If approved, the rate hike would increase average bills by $11.83 a month, or more than $140 a year. 

Despite chronic mismanagement, the program has contributed to six consecutive years of record Peoples Gas profits. In its second quarter report to the Securities and Exchange Commission, parent company WEC Energy Group once again credited the pipe-replacement program for driving increased utility margins. WEC cited a $5.7 million increase in revenue attributable to the program compared to the same quarter last year. 

“It’s time to stop rewarding failure with record profits,” said Illinois PIRG Director Abe Scarr. “The Illinois Commerce Commission should take this opportunity to rein in the utility’s out-of-control spending that is driving up gas bills in Chicago.”

Peoples Gas customers have struggled with rapidly rising gas bills for years, driven by reckless utility spending on its massive pipe-replacement program. Even during warmer summer months, Peoples Gas customers were collectively $111 million behind on their bills at the end of July, according to a separate utility filing on Tuesday. In July, Peoples Gas sent disconnection notices to 5% of its customers, a higher percentage than any other major Illinois utility. 

“The mismanaged pipeline-replacement program has Chicagoans in crisis, while Peoples Gas pushes for a record rate hike and a seventh straight year of record profits,” CUB Executive Director Sarah Moskowitz said. “We can’t afford gas. In the short term, we urge state regulators to say no to Peoples’ unjust and unreasonable rate hike, and in the long-term we need to develop a plan for moving away from gas in a way that protects and benefits all residents.” 

Polling released last week shows Chicagoans are deeply concerned that Peoples Gas is pushing for a record rate hike. Chicagoans are against the proposed increase  61%-32%, and opposition grows to 73%-25% after hearing arguments against the rate hike, including about the mismanaged pipe-replacement program. 

In 2013, Peoples Gas successfully lobbied to help pay for the pipe-replacement program through a ballooning, legislatively approved surcharge on customer bills, known as the “Qualified Infrastructure Plant” or “QIP” charge. At the time, legislators were told the charge would only cost Chicagoans about $1.14 a month, but in June, the average Peoples Gas customer paid more than $17, according to the utility’s quarterly report.