Peoples Gas cuts $58 million from rate request

CHICAGO — Peoples Gas announced Tuesday that it cut $58 million, or nearly 30%, from its January rate hike request.

The adjustment, reflecting lower than expected costs for recent infrastructure investments as well as the deferral of other construction to later years, brings the revised request to $144 million.

If approved by regulators this December, the amended request would add around $7-8 to monthly bills for typical residential customers, down from the $10-11 sought in the original request. It would take effect at the end of 2026 or start of 2027, depending on the timing of the decision.

“Peoples Gas works every day to keep bills as low as possible for customers, while delivering the reliable energy Chicagoans need,” Peoples Gas President Maria Bocanegra said in a statement. “This updated filing reflects that commitment.”

Peoples Gas provides natural gas service to more than 898,000 customers in the city of Chicago.

But for consumer advocates who recommended the original $202 million request be cut by roughly two-thirds, the adjustment doesn’t go far enough.

“It’s ridiculous for Peoples Gas to seek a pat on the back for this reduction when it’s still seeking to get a huge rate hike and take money from customers in a time when the cost of living is soaring,” Citizens Utility Board spokesperson Jim Chilsen told reporters at a briefing on Wednesday.

Read more: Peoples Gas files $202 million rate increase request with Illinois regulatory body | Cut with ‘an axe’: Watchdogs, AG call for massive cuts to Peoples Gas rate request

Abe Scarr, director of Illinois PIRG, a consumer advocacy group, welcomed the adjustment and interpreted it as a positive sign of more to come.

“Normally a 29% reduction in a rate hike would be a pretty good outcome at the end of the case, and we’re not even halfway through,” Scarr said. “From my perspective, it’s an acknowledgement that they can’t justify the full initial rate case, and I think as we move through the rest of the process we’ll be able to show that there’s more they can’t justify.”

Labor costs, meeting goals

The $58 million shaved from the request reflects costs of recently completed infrastructure work that were lower than expected, as well as a need to defer certain construction to coming years.

The regulatory body that oversees Peoples Gas, the Illinois Commerce Commission, has directed the company to retire 1,020 miles of natural gas pipes under Chicago’s streets by the end of 2034. Traditional pipe retirement often means digging up streets and sidewalks to replace old cast-iron pipes with new plastic ones. Consumer advocates argue pipes can be repaired more cheaply using alternative technologies like sealants that coat them from the inside. 

When Peoples Gas filed its rate request earlier this year, it expected to retire around 35 miles of aging iron pipes this year and up to 53 in 2027.

However, in its revised request, the company has changed its targets to around 14 miles this year and 47 miles next year, thanks to updated forecasts on project schedules, costs and construction workforce availability.

The availability of skilled labor to work on the pipe retirement program is being constrained by competition from data centers, which have been paying “premium wages” to retain and attract workers, according to testimony filed by Peoples Gas.

The company said the revised construction targets are not evidence that it cannot meet the 2035 retirement directive, but rather reflective of a startup year as the program onboards a new workforce and establishes new construction protocols.

Early last year, the commission ordered the pause of a previous version of the pipe modernization work, effectively throwing out the approach and sending Peoples Gas back to the drawing board following a yearlong ICC investigation.

The system modernization plan, as it was then called, was widely criticized for mismanagement and failure to prioritize the most at-risk pipes, leading to delays and budget shortfalls. Peoples Gas has since launched the pipe retirement program, which uses a new method to identify the most at-risk pipes.

But with around 60 miles of pipes forecast for retirement in the next two years, Scarr said he has questions about Peoples Gas’ ability to meet the goal mandated by regulators.

“They would need to retire 137 miles per year from 2028 through 2034, which to me is hard to believe they can do, especially after they retired four miles last year, which most of that year was after the pause was lifted,” Scarr said. “It does call into question the feasibility of all of this and their willingness to do it.”

Other cost drivers, public forum

Also driving the revised numbers is Peoples Gas’ removal of its request for $14.9 million in employee compensation tied to the company’s financial performance, something the watchdogs decried in their testimony, as well as a rate reduction negotiated as part of a settlement with the attorney general’s office earlier this year.

Peoples Gas customers concerned about the rate increase can share comments with the ICC at public forum in Chicago on Wednesday evening.

PIRG’s Scarr said the forum is an opportunity for customers to weigh in on how Peoples Gas is spending its money. A recent analysis of Peoples Gas spending by PIRG found the company was planning to spend $5.5 billion on pipe replacement through 2034 to achieve safety improvements that PIRG said would generate $60 million in risk reduction benefits.

“That’s one penny of safety benefit for each dollar spent, you don’t have to be an economist to recognize a raw deal,” Scarr said. “Chicagoans deserve a voice in their energy future, and tonight’s forum is an important opportunity for people’s gas and utility regulators to listen.”

Peoples Gas spokesperson David Schwartz said in an email that PIRG’s analysis excluded key costs related to excavation pits, service reconnection and gas service interruptions, and reiterated that the pipe retirements are mandated by the ICC.

“Their (PIRG’s) assertions fail to reflect even the most basic aspects of truth and reality in terms of what it actually takes, at ground level, to execute this kind of large-scale construction work,” Schwartz said.

Customers who want to hear more and weigh in can attend the hearing from 7-9 p.m. on July 15 in the 10th floor library of Roosevelt University in Chicago. Those unable to attend in person may also submit comments to the ICC at https://icc.illinois.gov/docket/P2026-0065/public-comments.

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