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With home heating bills on the rise, new reports show harms of botched Peoples Gas pipe replacement program
With colder weather imminent and rising gas commodity prices predicted to increase Chicago gas utility bills by 35% this winter, two new reports demonstrate that Chicago is facing a home heating affordability crisis, driven by the mismanaged, misdirected Peoples Gas pipe replacement program.
According to a report submitted to the Illinois Commerce Commission Monday, 21% of Chicago gas utility customers were behind on their bills in October, collectively $121 million behind. This amount is two times more than the amount ComEd customers were behind on electric bills, despite ComEd having almost five times as many residential customers. Gas utility debt is concentrated in Chicago’s majority black communities; for example, in Englewood, 53% of customers are behind on their bills, by an average amount of $1,046.
According to the third quarter report released Friday on the troubled Peoples Gas pipe replacement program, the utility’s average customer paid a $13.54 monthly surcharge for the program over the past quarter — roughly twelve times the $1.14 per month the legislature was told customers would pay when it passed a law authorizing the surcharge in 2013. Over the quarter, the average customer paid more for the surcharge than for gas itself.
“The mismanaged Peoples Gas pipe replacement program is not only failing to address safety risks like it’s supposed to, but is also unnecessarily making bills unaffordable for a broad swath of Chicagoans,” said Illinois PIRG Education Fund Director Abe Scarr. “For years, state lawmakers have allowed this unaccountable program to continue without proper oversight. They should start reining it in this winter.”
The surcharge, granted to gas utilities two years after ComEd won automatic “formula” rate hikes at the beginning of its bribery scheme, operates like a formula rate for more than half of Peoples Gas’ annual capital spending, providing guaranteed profits and minimal regulatory oversight.
The two other gas utilities covered by the surcharge law, suburban Nicor and downstate Ameren, have also spent aggressively under the surcharge, leading to rate increases. For example, if the Illinois Commerce Commission approves a proposed order currently before it, Nicor will have raised delivery rates by almost 80% in under four years. Spending conducted under the surcharge is a significant contributor to this increase in delivery rates: in recent years, spending under the surcharge has accounted for half of Nicor’s overall capital spending, a major driver of delivery rate hikes. The pending rate increase is in addition to bill increases caused by the spike in gas prices, which is predicted to increase the average Nicor gas customer’s bill by 48% over last winter.
While the Peoples Gas pipe replacement program was relatively productive over the quarter, it remains behind schedule for the year, having retired 91% of the miles of gas mains it had planned to by the end of the third quarter. It was also once again over budget: the program has cost $213 million so far this year, $3.89 million per mile of pipe retired, which is 15% more than planned. This marks the fifteenth consecutive quarter that the program has been behind schedule and over budget — every quarter since the company began reporting quarterly in 2018.
In contrast, over the entire year in 2006, Peoples Gas spent $50 million in 2021 inflation-adjusted dollars to replace 47 miles of main at a relatively scant $1 million per mile retired.
Gov. JB Prtizker and state Attorney General Kwame Raoul have supported legislation to end the surcharge that Peoples Gas is using to recover costs of the pipe replacement program. That followed calls from Chicago Mayor Lori Lightfoot and the Chicago City Council for the state to take action. The policy change is supported by a coalition of 36 consumer, environmental and community organizations
An engineering study released last year echoed previous outside reviews, finding that the 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.
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 at: https://illinoispirg.org/feature/ilp/tragedy-errors
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