When the Illinois Commerce Commission rejected an emergency motion by Peoples Gas to restore $134 million of disallowed pipeline replacement funding for 2024, the work ground to halt while the state prepared to conduct a new investigation into the long-running program.
That has resulted in dozens of unfinished projects across the city and hundreds of layoffs by contractors scheduled to work on the pipeline replacement program this year, the utility said.
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It also meant a smaller than requested rate increase for residential gas customers in Chicago of about $8.20 per month, which began in January, according to the utility.
But as Peoples covered holes in the ground for projects that were put on hold, it also convinced the ICC earlier this month to give the utility another shot with a “limited scope” rate request rehearing to fund completion of the unfinished work.
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Testimony will begin next month and by May the ICC is expected to rule on whether Peoples can finish the work that was already underway — and pass the additional costs along to customers.
“We appreciate the Commission granting a rehearing, and their understanding of the importance of completing unfinished work,” Peoples Gas spokesperson David Schwartz said in an email. “After all relevant facts are examined during the rehearing, we expect to be allowed to recover the cost of the work.”
Starting any new pipeline replacement work will depend on the state’s broader review of the program.
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. On Nov. 16, the ICC issued an order pausing the pipeline program and reducing the rate increase to $300 million.
As part of its November decision, the ICC issued an order for a new investigation to begin by February to determine the best method and investment level to resume replacement of high-risk gas pipes.
The full rate increase sought by Peoples would have added $11.83 per month to the delivery portion of the average residential customer bill beginning in January. The reduced rate increase approved by the ICC will add $8.20 per month in delivery charges to most residential bills this year, Schwartz said.
That number could go up, however, depending on the outcome of the rate rehearing, and the ICC’s decision on the future of the broader pipeline replacement plan.
Citizens Utility Board, a 40-year-old nonprofit watchdog group, is challenging both the Peoples Gas rate rehearing and the request to pass additional pipeline funding costs along to consumers.
“Peoples Gas has raked in record profits for six straight years, and just two months ago obtained a record $300 million rate hike — and yet somehow the company thinks it’s the one that has been victimized, rather than hundreds of thousands of Chicago consumers that have seen their Peoples Gas bills soar in recent years,” Sarah Moskowitz, CUB’s executive director, said in a statement Thursday. “We urge the ICC to reject this effort by Peoples Gas to gouge consumers for even more money.”
Launched in 2011, the Safety (formerly System) Modernization Program to replace 2,000 miles of aging iron pipes below Chicago streets is 38% complete and Peoples Gas says it will take until 2040 and cost about $8 billion to finish.
Peoples Gas, which serves 884,000 customers in Chicago, was acquired by Milwaukee-based WEC Energy Group in 2015.
In December, when Peoples Gas unsuccessfully sought to claw back $134 million of disallowed pipeline replacement funding for 2024 to address uncompleted projects, it warned of safety risks from leaking pipes, gaping holes in streets and sidewalks, replacement meters left “dangling” on customer residences and hundreds of jobs lost in the new year.
Some of that has come to fruition.
In addition to halting ongoing work, Peoples canceled $150 million of new pipeline replacement work scheduled for 2024, resulting in hundreds of layoffs, the utility said.
About 200 members of the International Union of Operating Engineers Local 150 in Countryside were laid off by contractors working on the pipeline replacement project “days after celebrating Christmas with their families,” union spokesperson Kristine Kavanagh said.
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Peoples Gas estimates the total number of jobs lost across all trades at between 700 and 1,000 “due directly to the canceled contract work,” Schwartz said Thursday.
While Peoples has not made any layoffs internally because of the paused pipeline program, Schwartz said the utility is continuing to assess the situation.
“If any job loss is necessary, our goal is to minimize it,” Schwartz said.
As far as the dangling meters and other unfinished work, Schwartz said Peoples Gas is working on it.
“We have taken steps to mitigate safety risks, and are currently evaluating how to best move forward with our work to complete projects that were in progress at the end of 2023, in cooperation with the city of Chicago and other stakeholders,” Schwartz said.
rchannick@chicagotribune.com