AARP, CUB Mount Statewide Campaign Against Auto Rate-Hikes Bill

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Mar 26, 2013, 11:38 ET

SB 1665/HB 2414 WOULD SLAM ILLINOIS CONSUMERS WITH A DECADE OF YEARLY, AUTOMATIC RATE HIKES TOTALING UP TO $3 BILLION

CHICAGO, March 26, 2013 /PRNewswire-USNewswire/ -- Gas utilities are pushing legislation that would cripple consumer protections and hit customers with the equivalent of a 10-year "natural gas tax" of up to $3 billion, AARP Illinois and the Citizens Utility Board (CUB) warned Tuesday as they kicked off a statewide campaign against Senate Bill 1665/House Bill 2414.

Peoples Gas, North Shore Gas, and Ameren—whose parent companies made $840 million in profits in 2012— are pushing the General Assembly to pass the bill, which would set rates by formula and open the door for a decade of yearly, automatic rate hikes.

However, CUB and AARP, as part of a consumer coalition called ROAR—Ratepayers Opposed to Automatic Rate Increases, urged people to visit www.StopIllinoisRateHikes.com. There, consumers can find easy ways to contact state legislators and ask them to oppose the bill.

"This legislation is merely an attempt to skirt consumer protections against unfair increases and hit Illinois consumers with the equivalent of a 'gas tax' of up to $3 billion," CUB Executive Director David Kolata said. "The current regulatory system allows utilities to get the rate hikes they need—but first they have to prove they actually need them."

"Higher natural gas rates will significantly hurt low-income families who live paycheck to paycheck, individuals who have lost their jobs, and older residents living on fixed incomes, all of whom rely on utilities for their well-being and health," said AARP Illinois State Director Bob Gallo. "As electric, water and telephone companies have joined natural gas providers with legislation of their own, we urge consumers to call our Affordable Utilities Hotline (1-800-719-3020) to get connected to their legislators and urge them to oppose these bills."

Currently, gas utilities have to prove they need a rate increase in 11-month cases before the Illinois Commerce Commission (ICC). This bill would essentially leapfrog that process, opening the door for automatic rate hikes that guarantee utilities a generous Return on Equity (ROE), or profit rate for shareholders.

The ROAR coalition, including AARP, CUB, Citizen Action/Illinois, and Illinois PIRG, outlined key concerns about SB 1665/HB 2414:

It's damaging. A CUB analysis estimates that the bill would cost Peoples Gas and North Shore Gas customers an extra $1.3 billion to $2.7 billion over the next decade, or up to $2,780 per family. Ameren customers would pay $360 million to $414 million, or up to $500 per family.

It's unnecessary. The utilities claim they need the bill to perform key pipe work, but they also admit they would do the necessary upgrades even without a formula rate—as the law requires them to do. For example, Peoples Gas' current maintenance plan calls for an average of more than 100 miles of new pipeline per year, a more ambitious rate than that required by SB 1665/HB 2414.

It's unfair. The bill would target a select minority of Illinois gas customers for higher rates, exempting the majority of Illinois consumers, including most Chicago suburbs.

It's excessive. SB1665/HB 2414 would secure the gas utilities an ROE equal to what the electric utilities received in the 2011 "smart grid" legislation. Yet, that is unnecessarily generous because gas utilities have less risk and typically earn a lower ROE than their electric counterparts—about 30 points lower across the country and 45 points lower in Illinois.

It's risky. "Rate caps" in SB 1665/HB 2414—5 percent for Peoples and North Shore customers, 2.5 percent for Ameren—apply only to the delivery portion of the bill, not the total bill, piling even more risk on consumers. The Peoples cap is twice as generous as any other legislatively-mandated rate protection measure.

It's not a jobs bill. The bill does promise some jobs (up to 1,000 for Peoples/North Shore, up to 250 for Ameren), but the legislation as drafted allows the utilities to count employees who were hired as far back as 2008.

"A vote against the 'gas tax' legislation is not a vote against pipe upgrades," Kolata added. "The current regulatory system is designed to allow the gas utilities to make a healthy profit and cover their costs. This bill, as drafted, is more about excessive profits than pipes."

CUB is Illinois' leading nonprofit, nonpartisan utility watchdog organization. Created by the Illinois Legislature, CUB opened its doors in 1984 to represent the interests of residential and small-business utility customers. Since then, CUB has saved consumers more than $10 billion by helping to block rate hikes and secure refunds. For more information, call CUB's Consumer Hotline at 1-800-669-5556 or visit CUB's award-winning website, www.CitizensUtilityBoard.org.

SOURCE Citizens Utility Board