Nicor's rate hike request, costly Peoples Gas pipeline project are on regulators' agenda
Over the next few months, Illinois regulators will need to shut off the valve on any excessive costs for gas bills.
Nicor, which pipes natural gas to residences and businesses in most of northern Illinois outside Chicago, is asking the Illinois Commerce Commission to approve a $309 million rate hike. If granted, the total increase for customers will be more than $1 billion since 2018.
That would mean the part of a customer's bill that goes toward the costs for Nicor to deliver gas would more than double in six years. The delivery charges make up about a third to a half of total gas bills, depending on the fluctuating cost of natural gas itself.
Also, in the next few weeks, the ICC will decide whether to allow Peoples Gas to resume its over-budget pipeline replacement program in Chicago, which is now on pause. Judging by administrative steps it has taken, Peoples might also submit a rate increase request of its own, according to Illinois PIRG (Public Interest Research Group).
Those are two developments that could hit us, the customers, in the wallet. As the ICC goes through the months-long process of examining Nicor's proposal, it should insist that every extra penny the utility is asking for is fully justified.
For example, Nicor's proposed rate hike includes a measure that would boost its authorized profit rate from 9.51% to 10.35%. That's extra money for shareholders, but it is also an extra cost for customers — about $112 million worth each year, according to Illinois PIRG. The Citizens Utility Board called it a "money grab."
Nicor said it is investing in streamlining technology and decarbonization. It has also, to its credit, pushed an energy efficiency program to reduce the amount of gas that is burned.
Meanwhile, Peoples' pipeline replacement program could double Chicago heating bills over the next 15 years, according to a CUB-commissioned study by Groundwork Data, which Peoples disputes. In 2023, the ICC paused the pipeline replacement program, but two ICC administrative law judges in November recommended Peoples resume replacing pipes, with some limits.
The idea behind the replacement project is to ensure the aging network of gas lines is safe. But critics say the program should be scaled back in a way that saves money without compromising safety.
Back to the trough, again?
The estimated cost of the pipeline replacement program has soared from $1.7 billion at the start in 2007 to nearly $13 billion worth of work that still needs to be done. And that's with less than 40% of the work completed. That's a lot to ask of ratepayers, many of whom can't afford the gas bills they get now.
If it seems as though the gas utilities have been coming back to the trough for more money again and again, you're right. Nicor has requested five significant rate hikes since 2017. Peoples Gas received an increase of about $303 million in 2023.
On Monday, consumer advocates are scheduled to deliver more than 5,000 public comments about Peoples' pipeline replacement program at the ICC's Loop offices.
All of this is going on as the state and the industry try to figure out what the demand for gas will be in the future as Illinois tries to transition to an energy sector based more on sources that don't involve burning fossil fuels. Last March, the ICC started "Future of Gas" workshops to develop a plan for how gas utilities will fit into that future.
Setting rates for gas utilities is a complex process. Smoothly transitioning away from burning fossil fuels will be a challenge — but it's a challenge that has to be met, given our global climate crisis.
In the meantime, the ICC should ensure gas customers don’t pay more than necessary.
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