CUB Files Petition Asking ICC to Reconsider $84 Million Peoples/North Gas Rate Hike

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Feb 23, 2010, 12:15 ET

CHICAGO, Feb. 23 /PRNewswire-USNewswire/ -- The Citizens Utility Board (CUB) has filed a petition for rehearing, asking the Illinois Commerce Commission (ICC) to reconsider a decision to grant Peoples Gas and North Shore Gas an $83.6 million rate increase and allow Peoples to hit customers with a controversial charge to recover costs associated with unspecified future gas-main replacement.

The ICC granted the increase on Jan. 21, over the objections of CUB and the Illinois Attorney General's Office, which presented evidence showing the increase was excessive and the new charge, or "rider," unnecessary and illegal under Illinois law.

While the $83.6 million increase is less than the company's original proposal, it is more than what the consumer groups' evidence showed was justified—and even higher than the recommendations of the ICC's own staff and administrative law judges.

"Many consumers are struggling just to make ends meet and adding another $84 million a year to Chicago-area gas bills will just make a bad situation worse," CUB Executive Director David Kolata said. "We hope the ICC will reconsider this decision."

Along with approving the increase, the ICC granted the company's request for a line item charge on bills to recover costs associated with the future replacement of gas mains—despite the fact that in 2008 the ICC concluded the same plan was not necessary or allowed under state law.

The charge, known as an Infrastructure Cost Recovery (ICR) rider, will allow the company to recover the costs automatically through a separate line item on bills, rather than having the costs reviewed as part of a thorough, 11-month rate-hike case. Such a scheme is illegal because Illinois law bans "single issue ratemaking" and requires the ICC to review all costs before they can be passed on to consumers.

Peoples Gas argued the new charge would make it easier to accelerate the replacement of gas mains. However, the company has not committed to any concrete plans for future investments.

While the ICC's order said it would adopt a baseline level of improvements to be made before the new charge kicks in, that specific level wasn't subject to review in the current case. Under Illinois law, commission decisions must be based on the evidence in the record and parties to the case, such as CUB, must have a chance to review and challenge it. But under the commission's order, the ICC staff and the company agreed on the baseline for investments outside of the record in the case—with no chance for parties such as CUB to challenge it.

"We hope the commission will rethink its decision on this rider because it is clearly illegal," Kolata said. "The law doesn't allow the ICC staff and the company to negotiate critical terms of a case that will have such a huge impact on consumers' bills."

CUB filed the petition for rehearing late Monday. If the ICC refuses CUB's request, the consumer group plans to challenge the ruling before the Illinois Appellate Court. Peoples Gas' last rate hike, a $70 million increase approved in 2008, is currently on appeal, with consumer groups arguing a different, special rider approved in that case also is illegal.

The ICC approved a $69.8 million increase for Peoples Gas and $13.8 million for North Shore Gas. That translates into $50 to $70 more a year for the average customer. Those increases affect the companies' charge to cover the expense of delivering gas to homes—plus a profit. These delivery costs take up about a third of a customer's gas bill. The rest covers the cost of the actual natural gas, which the companies are supposed to pass on to customers, with no mark up.

CUB is Illinois' leading nonprofit 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 over the years. 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