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Chicagoans paid 43% more to heat their homes this past winter compared to the year before, a result of surging gas prices and the expensive Peoples Gas pipe replacement program, according to a new report released on Friday. While higher gas prices played the largest role in the year-over-year spike in bills, the pipe replacement program has been slowly raising home heating bills for years. For example, over the first three months of 2022, the average Peoples Gas customer paid just under $40 for the pipe replacement program through a surcharge on bills. Over the same period in 2018, the average customer paid $16 for the surcharge.
Separate reports also released Friday showed Peoples Gas customers were collectively more than $125 million behind on their bills, significantly more than suburban Nicor Gas customers, despite Nicor having more than twice as many customers. According to the report, one in five Peoples Gas customers were behind on their bills in April.
“Ever-escalating bills caused by the failing Peoples Gas pipe replacement program were softened for years by rock-bottom gas prices,” said Illinois PIRG Education Fund Director Abe Scarr. “With gas prices anticipated to stay higher, Illinois policy makers should finally take action to protect Chicago gas customers by restoring accountability to this failing program.”
A 2013 state law provides guaranteed profits and minimal regulatory oversight for certain gas utility infrastructure programs. In 2018, the Illinois Commerce Commission, which regulates utilities, said that the law rendered it powerless to slow down Peoples Gas’ spending on the pipe replacement program, regardless of its inefficiencies, waste and high cost to consumers.
Peoples Gas fell 38% short of its quarterly plan for miles of pipe replaced, while costing 30% more per mile of pipe replaced than planned. This marks the 17th consecutive quarter that the program has been behind schedule and over budget — every quarter since the company began reporting on the project quarterly in 2018.
A 2020 engineering study echoed a previous outside audit, finding that the Peoples Gas pipe replacement program was failing to achieve its public safety purpose by rapidly replacing pipes at risk of failure. The study concluded that the program “has not coincided with a noticeable reduction in pipeline failure rates -- particularly in the last decade."
Despite this clear record of failure, the program is contributing to record Peoples Gas profits. Peoples Gas made a record $205 million in profits in 2021, which its parent company WEC credited to increased revenue from the pipe replacement program and from increases in late fees paid by customers behind on their bills. Profit information is not yet available for Peoples Gas for the first quarter of 2022, but a filing by WEC indicates that Peoples Gas could have profited more than $100 million in the first quarter of 2022 alone.
“Public utilities are private companies with a state-granted monopoly to provide a public good,” continued Scarr. “Our laws and regulations should align their opportunity to profit with the successful provision of safe, affordable, reliable utility service, not force customers to pay more to get less.”
In his comprehensive energy proposal last year, Gov. JB Prtizker proposed ending the law allowing Peoples Gas and other gas utilities to assess the surcharge and profit off of billions of dollars of infrastructure spending with limited oversight. Chicago Mayor Lori Lightfoot and the Chicago City Council have also called for the state to take action. The policy change is supported by a coalition of 36 consumer, environmental and community organizations.
Illinois PIRG Education Fund has argued for years that the program is failing to reduce system risk in proportion to the billions of dollars Peoples Gas is spending for two main reasons. First, Peoples Gas is prioritizing an overhaul of its system from low to medium pressure over replacing at-risk pipes. Further, Peoples Gas has chronically mismanaged the program. Access Illinois PIRG Education Fund’s detailed report on the program’s “tragedy of errors” at: https://illinoispirg.org/feature/ilp/tragedy-errors
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