State regulators rejected most of an additional $7.9 million rate increase proposed by Peoples Gas, which was seeking to charge consumers to complete unfinished work in the paused pipeline replacement program.
Instead, the Illinois Commerce Commission approved a $1.6 million rate increase for emergency work “out of an abundance of caution,” Chair Doug Scott said during an open meeting in Springfield Thursday.
“The Commission’s decision today should in no way prohibit the company from performing necessary emergency work to maintain a safe and reliable system,” Scott said.
Peoples Gas was previously granted a record $304.6 million rate increase for 2024, but requested a rehearing in January to recover additional costs for pipeline projects already underway as well as emergency repairs and public infrastructure work.
The $304.6 million rate increase added about $8.20 per month in delivery charges to the average residential bill this year. The $1.6 million rate increase approved Thursday will increase customer bills by another 15 cents per month beginning this summer, the utility said.
The utility was looking to add nearly $145 million in denied infrastructure funding back into the budget this year. Earlier this month, an administrative law judge recommended approving the additional funding and proposed rate increase.
But the ICC decision Thursday reduced that total to $28.5 million for emergency work, disallowing everything else, including the entire $82.8 million budgeted by Peoples to complete pipeline replacement projects in progress.
“The Commission’s decision risks the continued safety and reliability of Chicago’s energy system,” Peoples Gas spokesperson David Schwartz said in a statement Thursday. “The proposal the Commission rejected today will harm our future efforts to address critical needs in the system.”
Peoples Gas initially filed for a record $402 million rate hike for 2024, in large part to continue funding its pipeline replacement program after a 10-year legislative surcharge enabling it to automatically pass the costs along to customers expired at the end of last year. In November, the ICC issued an order pausing the pipeline program and reducing the rate increase.
When the ICC rejected an emergency motion by Peoples Gas in December to restore funding for projects already underway for 2024, the utility scrambled to cover holes in the ground and affix dangling meters before the work ground to a halt.
Peoples Gas left 85 pipeline replacement projects unfinished at the end of last year, according to ICC filings.
In January, when the ICC granted Peoples the rate rehearing, the utility took a leap of faith and went back to work on the unfinished pipeline replacement projects.
Some of that pipeline work has been completed, but a number of ongoing projects are still unfinished, the utility said Thursday. Without approved funding, the incomplete pipeline work may remain in limbo.
“We will fully review the final order to determine its impact on our operations,” Schwartz said.
No new pipeline replacement projects will begin until the ICC finishes its review of the long-running program, which is expected to be completed in January 2025.
Launched in 2011, the Safety (formerly System) Modernization Program to replace 2,000 miles of aging iron pipes below Chicago streets was plagued from the outset by delays and budget overruns. More than a decade later, the project is 37% complete and Peoples Gas says it will take until 2040 and cost about $8 billion to finish — if the ICC approves its resumption.
Juan De Luna, of Miller Pipeline, drills holes for rebar on a section of a Peoples Gas pipeline replacement project at Wrightwood and Sheffield avenues in Chicago on May 29, 2024. (Terrence Antonio James/Chicago Tribune)
The replacement program was driven by pressure from the administration of former President Barack Obama to hold utilities across the U.S. accountable for aging pipeline systems following a 2010 explosion in San Bruno, California, that killed eight people, injured 58 and destroyed 38 homes.
But consumer advocates have argued for years that gas pipelines may be obsolete by the time the infrastructure is updated, as the shift to electrification and renewable energy sources such as wind and solar gain traction.
Consumer groups applauded the decision Thursday to withhold additional funding for any pipeline replacement work until the ICC review is completed.
“Not only did Peoples Gas fail to justify yet another rate hike, this proceeding provided further evidence that the Peoples Gas pipe replacement program is profoundly troubled, reinforcing why the commission’s investigation is critically important,” Abe Scarr, director of Illinois PIRG, a nonprofit consumer advocacy organization, said in a statement.
Peoples Gas, which serves 891,000 customers in Chicago, was acquired by Milwaukee-based WEC Energy Group in 2015.
