Concluding a year-long investigation into concerns that Peoples Gas’ controversial pipe-replacement program was ushering Chicagoans to the brink of a financial abyss, the Illinois Commerce Commission (ICC) Thursday significantly restricted the amount the utility sought to spend to complete the initiative. In a ruling on the future of Peoples’ System Modernization Program (SMP), the Commission excluded large parts of Peoples’ preferred pipe-replacement blueprint from the scope of expenditures it authorized and required the utility to take a more cost-conscious and incremental approach to the project.
Peoples’ full proposal was estimated to cost $12.8 billion, and a recent report by the Citizens Utility Board (CUB) and industry analysts Groundwork Data found that it would leave consumers battered by serial record-breaking rate hikes over the next 15 years.
In response to the ruling, CUB Executive Director Sarah Moskowitz made the following statement:
We thank the Commission for protecting consumers against the spiraling costs and intractable waste that have plagued Peoples Gas’ pipe-replacement program from its inception.
For years, Peoples has sought to pad the costs of its SMP with unwarranted expenditures that inflate heating bills for consumers. Today, state regulators made clear that the company must justify its spending going forward. By approving only a portion of the pipe-replacement program, the Commission adopted a more cost-conscious, incremental approach to modernizing Peoples’ system that spares Chicago families, who are already engulfed in a heating affordability crisis, from more unnecessary financial grief.
Peoples was threatening to compound their plight by proposing another pipe-replacement spending binge that would have subjected consumers to recurring record-breaking rate increases over the next 15 years, according to a study CUB released late last year. But with today’s ruling, which limits Peoples discretion to replacing only the oldest, most vulnerable parts of its system, regulators stifled spending on work the utility couldn’t justify as a demonstrable safety need. In doing that, they refused to succumb to bullying and pressure tactics that Peoples and its allies unleashed on them repeatedly over the past year.
Background:
- In November 2023, the Illinois Commerce Commission (ICC) slashed Peoples Gas’ proposed rate hike by $100 million and paused its over-budget, behind-schedule pipeline-replacement program out of concern for how expensive the program has been for Peoples Gas customers. The ICC launched an investigation of the program’s management and they ruled on that probe on Thursday, Feb. 20.
- Launched in 2011, the Peoples Gas System Modernization Program, or SMP, is the company’s plan to replace pipes underneath Chicago. Customers pay for this work through their gas bills.
- The mismanaged SMP has become so expensive to customers that it has sparked a heating affordability crisis in Chicago. Consistently about 1 in 5 customers are more than 30 days behind on their gas bills.
- In October 2024, CUB came out with a report that found that unless the ICC reins in reckless spending by Peoples Gas it will be a financial disaster for Chicago gas customers. Read more at PeoplesGasBoondoggle.org.
- CUB’s 2024 study found that if Peoples Gas would be allowed to spend at the pace it wants the utility would need a series of rate hikes averaging nearly 7 percent a year through 2040.
- In effect, that means the company would need to average a record-breaking rate hike for 15 straight years. That would double annual charges for the average customer from about $1,206 to $2,424 by 2040.
- Chicagoans would have to pay $12.8 billion to finish Peoples Gas’ plan for pipe-replacement, and it would take an astounding 75 years to pay off the pipe-replacement program.
