City Council committee grills Peoples Gas over proposed rate hike

A City Council committee grilled the president of Peoples Gas Monday ahead of a decision by state regulators on a proposed $402 million record rate hike request by the utility.

The Illinois Commerce Commission is expected rule Nov. 16 on the rate hike proposal, which includes $207 million to continue funding the ongoing pipeline replacement program. If approved, the rate increase would add $11.83 per month to the average residential customer bill beginning in January.

While the city has no authority over the rates charged by Peoples Gas, which provides service to more than 884,000 customers in Chicago, the hearing questioned the need for the increase in the wake of six years of record profits by the utility’s parent company, ballooning customer late fees and a massive infrastructure project that is behind schedule and billions above initial budget projections.

“It is a very important decision before the ICC that will affect the future of all Chicagoans,” said Ald. Bill Conway. “And in the coming days I’m going to ask this committee to weigh in so we can present our findings to the ICC in short order.”

Conway called for the hearing before the Committee on Environmental Protection and Energy, which included hours of testimony from Peoples Gas President Torrence Hinton, union leaders and consumer advocates debating the costs and benefits of the proposed rate increase.

Peoples Gas filed for the $402 million rate hike in January, with more than half of the increase earmarked for its pipeline replacement program after a 10-year legislative surcharge enabling it to pass the costs along to customers expires at the end of this year. While Peoples currently charges customers $15 per month to fund the pipeline program through December, most pay about $50 per month in fixed costs — before using any gas — making it harder for many Chicago residents to afford their heating bills.

“If Peoples Gas gets the largest rate hike in Illinois history, it will intensify a crisis of soaring heating costs that has been ongoing for about a decade,” said Ivonne Rychwa, outreach director of the nonprofit Citizens Utility Board. “The crisis is fueled by Peoples Gas’ reckless spending and its mismanaged, over budget and behind schedule pipeline replacement program.”

Consumer watchdog groups have been advocating for several years to end the built-in surcharge, putting Peoples’ spending under more regulatory scrutiny and forcing the utility to get infrastructure improvements approved through traditional rate cases, including the proposal currently before the ICC.

Launched in 2011, the 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 pipeline replacement program is 36% complete, and Peoples Gas says it will take until 2040 and cost about $8 billion to finish.

It was originally projected to cost $2.6 billion and take 20 years to complete.

Hinton, who was promoted to president of Peoples Gas and co-owned North Shore Gas in June 2022, defended both the pipeline replacement program and the proposed rate increase.

“We are making these investments for safety and reliability,” Hinton said. “That infrastructure that we’re doing, the investments we are making, ultimately is going to make sure that we continue to operate a safe and reliable system. It does cost. But those investments are needed.”

During his testimony, Hinton said the costs to run the utility have “increased significantly” over the past decade, spiked by rising inflation in recent years. At the same time, he pointed to lower year-over-year natural gas costs as “largely offsetting” the proposed rate increase for most customers.

Hinton also suggested, at least indirectly, that the utility’s funding might affect its ability to employ its diverse workforce, do business with diverse suppliers and continue its level of charitable giving.

“Are you telling this committee today that if you don’t get your record rate hike, you will cut jobs and community support, instead of cutting into your sixth straight year of record profits?” asked Conway, challenging Hinton.

While Hinton would not directly connect the dots to hiring or charitable giving, he acknowledged the rate hike decision by the ICC would have a “real impact” on Peoples Gas.

“Whatever we receive from the commission will impact how we run the business,” Hinton said. “We ultimately will have to make decisions on the outcome of that rate case on how we continue to try to be a safe and reliable energy provider. It will have an impact.”

rchannick@chicagotribune.com