Peoples Gas is not being transparent about its new safety risk methodology

Over the past 14 years, many problems have plagued Peoples Gas’ pipeline safety programs. 

Among them: after spending billions of dollars to address safety risks posed by old iron pipes, indicators of risk, like leak and failure rates, have not meaningfully declined. As a result, customers are paying significantly higher bills while not getting the safety improvements they are paying for. 

One reason for this failure is that Peoples Gas has been using outdated and broken tools to assess safety risks on its system.

Thankfully, the utility is in the process of adopting a new risk methodology, one it claims conforms to industry best practices. It has hired the JANA corporation to develop the new methodology. Unfortunately, during the 2024 Illinois Commerce Commission (ICC) investigation into the Peoples Gas pipe retirement program, the utility rebuffed attempts by experts hired by Illinois PIRG to evaluate the new methodology in order to verify it conforms to best practices. 

At the end of the investigation, the ICC made clear it expects Peoples Gas to be more transparent with its risk methodology going forward, stating it would review the JANA methodology once it was implemented and a full factual record was developed. It also wrote that “cost recovery for implementation of JANA and any projects that are prioritized by JANA’s probabilistic risk model is subject to appropriate Commission review.” 

To translate: the Commission pointedly reminded Peoples Gas that the Commission could slash the utility’s next rate hike if Peoples Gas fails to justify its use of the new JANA methodology. 

That’s critically important because executives of Peoples Gas’ corporate parent, Milwaukee based WEC Energy Group, recently told Wall St. analysts that it expects to ramp up to spending half a billion dollars every year on pipe replacement, significantly higher the annual spending rate that led to the largest gas utility rate hike in Illinois history in 2023. In theory, most of that spending — which if it comes to pass will result in massive rate hikes — will be on projects “prioritized by JANA’s probabilistic risk model.”

We’ll see the program ramp up in ’26 and ’27 and get to what we think will be a full run rate, and we’re still pulling the numbers together in ’28, but we expect that will probably be a little over $500 million a year going forward. And remember, our old program was about $280 million to $300 million. 

– Scott Lauber, President and Chief Executive Officer — WEC Energy Group, Q1 2025 Earnings Call, May 6, 2025

While the ICC effectively deferred making any judgments on Peoples Gas’ adoption and implementation of a new JANA methodology at the conclusion of its investigation, it encouraged Peoples Gas to hold informal workshops with stakeholders. It wrote that such workshops “should include a better understanding of the inputs, weightings, and expected outcomes.”

In response to the ICC’s suggestion, Peoples Gas scheduled a single, hour-long workshop. The workshop, held on May 12th, consisted of a high-level overview of the JANA methodology, and an opportunity to ask questions. Neither the direct presentation, nor responses to our experts’ questions provided the level of technical detail necessary for our experts to vet the new methodology. 

At the conclusion of the May 12th workshop, Peoples Gas invited follow up questions in writing. Illinois PIRG submitted 26 detailed questions on May 16th. On May 21st, the company responded, declining to answer any of our questions. In doing so, Peoples Gas cited its unsupported and inaccurate belief that the experts hired by Illinois PIRG are competitors with JANA. To date, Peoples Gas has also not followed up with answers to questions our experts posed during the May 12th workshop, as it said at the time it would. 

On Friday, May 30th, we submitted our workshop comments. We made three suggestions:

1. Peoples Gas should answer our experts’ questions.
2. Peoples Gas should draft and circulate a confidentiality agreement to allay any concerns it has with our experts. (This is a routine practice when dealing with proprietary or sensitive business information in ICC proceedings. The ICC has made clear that claims of proprietary business information cannot frustrate ICC and stakeholder review.)
3. Peoples Gas should hold at least one more workshop, with technical experts available to answer detailed questions. If Peoples Gas wishes to only schedule one further workshop, it should set aside an entire day to allow for a thorough examination.

Peoples’ Gas reply to stakeholder comments is due June 20th, and a report to the ICC on the workshop on July 20th. 

Whether through this workshop process, or in Peoples Gas’ next rate case, Illinois PIRG will work to subject Peoples Gas’ approach to risk to appropriate scrutiny. Adopting a valid, transparent risk methodology is one of the key ways Peoples Gas can reform its pipe retirement efforts. After years of failure, it is critical that Peoples Gas fix its approach to safety risk, for the sake of our safety and our pocketbooks.