Illinois state regulators rein in Peoples Gas pipeline replacement program
The Illinois Commerce Commission voted on Thursday to allow Peoples Gas to resume a controversial pipeline replacement program, but with some big changes aimed at streamlining the project and saving customers money.
But the ICC said the expansive project "cannot come at an unreasonable or unjustifiable cost to customers," who have been upset about rising gas bills in recent years.
Consumer advocates had said the nearly $13 billion proposal project – which was billions over budget and years behind schedule could have led to record-breaking rate hikes over the next 15 years if the ICC hadn't stepped in to force Peoples Gas to scale it back.
Utility watchdogs said customers shouldn't expect a big change in their bills right away, but the ICC's decision should rein in future rate hikes at Peoples Gas.
"Essentially, what we saw today is the regulators deciding to regulate, and that's what we wanted," said Sarah Moskowitz, executive director of the Citizens Utility Board, a non-profit utility watchdog that fights rate hikes.
Last year, CUB released a report showing that if Peoples Gas was allowed to continue spending at its current rate, the pipe replacement program would cost an additional $12.8 billion to finish, doubling the amount customers pay for gas by the year 2040.
Peoples Gas has said the pipeline replacement program is necessary because so many of their pipes are past their useful service life.
There are currently more than 1,100 miles of dangerous, old, deteriorating cast iron and ductile iron, or CI/DI, natural gas pipes in Chicago that need to be replaced — some dating back as far as the 19th century — prompting Peoples Gas to spend billions of dollars on what is known as the "Safety Modernization Program" to replace them, and in return sending gas bills climbing.
But in November 2023, due to delays, the project going way over budget, and concerns that the program was not properly prioritizing addressing safety risks, the ICC paused the program and ordered an investigation.
On Thursday, the ICC ruled that the program can finally resume, but must refocus to specifically address the retirement of these aging CI/DI pipes by the year 2035.
"Chicagoans deserve a safe, reliable gas system. The record in this investigation shows that Peoples Gas was not prioritizing the removal of CI/DI pipes, but rather pursued it as one of several components of its System Modernization Program. As a result, the CI/DI retirement rate slowed over time," ICC Commissioner Stacey Paradis said in a news release. "The ICC's decision refocuses the utility's efforts with existing [Pipeline and Hazardous Materials Safety Administration] and engineering safety recommendations. It is now on Peoples Gas to change its approach."
Advocates for consumers were pleased with the ICC decision.
"On the whole, I think it's pointed the program in a better direction, refocusing on the core safety risks that the program always should have been about, and should be about going forward," said Abe Scarr, director of the Illinois Public Interest Research Group, a nonprofit consumer advocacy group.
Peoples Gas issued this statement:
"For more than a decade we worked to replace old, leaky pipes in a systematic way that improves the safety and reliability of Chicago's heating system. The Commission paused that work at the end of 2023, and has now lifted the pause. As we wait to receive the full Final Order and review it, the Commission made clear it wants us to focus on replacing more than 1,000 miles of pipes by 2035. This direction given by the Commission, compared to the prior approach, may necessitate additional cost and more construction sites disrupting streets across city neighborhoods."
Citizens Utility Board Executive Director Sarah Moskowitz issued this statement in response to the ICC decision:
"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."
