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Year-end report: Struggling Peoples Gas pipe program once again behind schedule, over budget 

Unaffordable program has Chicagoans $60 million behind on heating bills, with more than 300,000 disconnection notices sent
For Immediate Release

Peoples Gas released its fourth quarter report Tuesday on its troubled pipe replacement program, which was the subject of a highly critical Illinois PIRG Education Fund report last June. Peoples Gas’ own data shows that for the eighth consecutive quarter --  a period that spans every quarterly report on the project -- the program is behind schedule and over budget. 

The latest numbers also highlight how the program contributes to increasingly unaffordable home heating bills. High costs have led to Chicagoans owing $59.6 million in unpaid heating bills at the end of the year. This total reflects a steep and continued rise compared to $38.5 million in overdue payments at the end of last year. Over the course of 2019, Peoples Gas sent customers more than 300,000 disconnection notices, an increase of 20% over last year.

A recently released engineering study echoed previous outside reviews of the program, finding that it was failing to achieve its purported purpose of protecting public safety by 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."

"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."

The pipe replacement program is a significant and growing contributor to customer bills. The average residential customer paid $104 for the program’s surcharge in 2019, out of a total annual bill of $1,160, meaning the surcharge accounted for 9% of customers’ bills, up from 6% in 2018. Because some program costs are collected through regular rates rather than the surcharge, the cost of the program to customers is even higher than these figures show. 

Capital spending is a well-articulated profit strategy for Peoples Gas’ parent company WEC Energy Group, which is planning $721 million in Peoples Gas capital spending in 2020 alone.  WEC, a Milwaukee-based energy holding company that owns gas and electric distribution utilities as well as electric generation and transmission assets, is also making gas utilities a bigger part of its business strategy going forward. WEC plans to grow gas distribution’s share of its overall asset base from 31% at the end of 2018, to 37% by the end of 2024.

Peoples Gas spent $293 million on its pipe replacement program over 2019 and replaced 59.1 miles of gas mains at a cost of $5 million per mile retired. In contrast, in 2006, Peoples Gas spent $48 million in 2019 inflation-adjusted dollars to replace 47 miles of main at $1 million per mile retired.  

Last week, State Rep. Joyce Mason and State Sen. Ram Villivalam introducedHouse Bill 5247 and Senate Bill 3497  so that Peoples Gas and other gas utilities 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

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