State regulators clamp down on Peoples Gas pipeline replacement program - WBEZ Chicago

Feb 21, 2025

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Regulators on Thursday pulled the reins on Peoples Gas and its maligned pipeline replacement program, subjecting the Chicago utility to yearly reviews of the massive project that has run a decade behind schedule and billions of dollars over budget.

The decision from the Illinois Commerce Commission allows Peoples Gas to get back to the trenches replacing hundreds of miles of aging underground pipes that deliver natural gas to homes across the city.

But after being put on hold for more than a year pending a state investigation, the utility has been directed to focus on the pipes identified as being at the highest risks for leaks as it completes all work by 2035. It will also have to bring in an independent safety monitor to report on the project each year starting in 2027.

“To be clear, the ICC’s decision is not a green light for Peoples’ Gas to return to business as usual,” ICC Chairman Doug Scott said in a statement. “It is Peoples’ and any utility’s responsibility to safely maintain the infrastructure needed to run its system. However, these projects cannot come at unreasonable or unjustifiable costs to customers.”

Consumer advocates called the decision a “a victory for Peoples Gas customers and all Chicagoans.”

“As a result of this order, we should get a program that costs less and leads to less aggressive rate hikes while actually making us safer,” said Abe Scarr, director of the Illinois Public Interest Research Group.

A Peoples Gas spokesman said 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.”

When the pipeline saga began almost two decades ago, the massive project was estimated to cost less than $2 billion to replace more than 2,000 miles of aging underground pipes by 2030. It has already cost $3.3 billion, with only 38% of the work completed.

The commission, whose five members were all appointed by Gov. JB Pritzker, ordered Peoples Gas to halt the work in late 2023 for a state review of the spending.

Pritzker wants to wean the state off fossil fuels in favor of renewable sources by 2050 under the Climate and Equitable Jobs Act he signed in 2021 — but the state has made only limited progress.

Peoples Gas executives and leaders of labor unions responsible for the work decried the stoppage, calling it a critical safety threat, with some pipes that were more than a century old. The utility said that natural gas is still more affordable than renewable energy alternatives for most of its 890,000-plus Chicago customers.

But consumer watchdogs have long derided the project as a boondoggle for ratepayers, fueling record-breaking profits for Peoples Gas and its Milwaukee-based parent company, WEC Energy Group. Lawyers for the city of Chicago and Illinois Attorney General Kwame Raoul’s office have also criticized the pipeline program.

The commission, which has the final say on how much utilities can charge residents, still granted Peoples Gas a record-high $300 million rate hike when it shut down the pipeline program. That tacked an additional $6 to the average monthly residential bill.

A study commissioned last year by the Citizens Utility Board suggested Chicago heating bills could double over the next 15 years without an overhaul of the pipeline program. Peoples Gas dismissed that report as “claims from an out-of-state, anti-natural gas group.”

Two administrative law judges — commission employees who help litigate the quasijudicial process — mostly sided with Peoples Gas in a proposed order last fall. They recommended commissioners allow $7.2 billion in spending to complete the program by 2035, ahead of a 2040 target set by Peoples Gas, and called for the utility to file an updated replacement plan within two years.

The commission’s investigation found the utility “did not adequately prioritize the retirement of its most risk-prone pipes,” Scott said.

It’s wasn’t clear how much Peoples Gas will be cleared to spend on the program, but Sarah Moskowitz, executive director of the Citizens Utility Board, said the order “will curb spending and create some more checks on utility spending.”

“It costs money to replace these pipes, but in this case, there will be more oversight over how the utility is spending its ratepayers’ money,” Moskowitz said. “We will know that they’re able to do what they need to do in order to keep the system safe, and they’re not going to be using that as an excuse to just make unfettered improvements across the board and cost us billions and billions of more dollars.”

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