Quarterly report: Struggling Peoples Gas pipe program once again behind schedule, over budget

Chicagoans $40 million behind on heating bills

Illinois PIRG Education Fund

Peoples Gas released its third quarter report Friday on its troubled pipe replacement program, which was the subject of a highly critical Illinois PIRG Education Fund report in June. The report shows that for the seventh consecutive quarter —  a period that spans every quarterly report on the project — the program is behind schedule and over budget. 

The report also highlights how the program contributes to increasingly unaffordable gas bills, as high costs have led to Chicagoans being $40.1 million behind on gas bills at the end of September. This total reflects a steep and continued rise compared to $25.7 million behind at the same time last year, an increase of almost sixty percent. In total, as of September, more than 51,000 Peoples Gas customers were eligible for disconnection.

The pipe replacement program, a significant contributor to customer bills, is also a profit center for the utility. In September, the program accounted for at least 16 percent of the average Chicagoan’s gas bill. At the same time, Peoples Gas’ parent company, WEC Energy Group, described capital spending as supportive of overall growth in the company’s earnings per share, and presented plans to increase Peoples Gas capital spending to $721 million in 2020, according to a November investor presentation.

“The Peoples Gas pipe replacement program is poorly designed, mismanaged and an all-around bad deal for Chicago,” said Illinois PIRG Education Fund Director Abe Scarr. “For a project spanning decades, falling behind schedule or going over budget any one quarter or year is not necessarily a sign of failure, but doing so every quarter is. Forcing Chicago heating customers to pick up the tab for this program is unacceptable.”

Peoples Gas spent $227 million on its pipe replacement program over the first nine months of 2019 and replaced 32 miles of gas mains at a cost of $7 million per mile retired. In contrast, over the entire year in 2006, Peoples Gas spent $48 million in 2019 inflation-adjusted dollars to replace 47 miles of main at $1 million per mile retired. 

The Office of the Illinois Attorney General tried to force the Illinois Commerce Commission to fulfill its regulatory obligation to reform the Peoples Gas replacement program. The state’s top law enforcer filed a lawsuit after the commission decided to take no action in January 2018, following a two-year investigation of the program. This summer, an Illinois appellate court denied the Attorney General’s appeal. The court’s decision places responsibility to reform the pipe replacement program with the Illinois General Assembly, which authorized a special cost recovery mechanism for Peoples Gas and other large gas utilities for similar projects in 2013. State Rep. Sonya Harper introduced House Bill 3044 so that Peoples Gas can no longer use that special cost recovery mechanism to charge customers for the program.

The Chicago City Council is currently considering a resolution calling on “Governor JB Pritzker and the Illinois General Assembly to restore necessary oversight of this troubled program, and take adequate action to protect Peoples Gas customers and the public interest.” 

Access Illinois PIRG Education Fund’s detailed report on the program at: https://illinoispirg.org/feature/ilp/tragedy-errors