Illinois utility regulators ordered another round of hearings March 1 into massive cost overruns of a 20-year program to replace old and leaky gas mains in Chicago as rate payers complain the steeper price tag could drastically increase heating bills.
Costs have skyrocketed to $6.8 billion, from a 2009 estimate of $2.6 billion, for the Peoples Gas project, which started in 2011 and calls for replacing 2,000 miles of cast and ductile iron pipe with polyethylene pipe by 2030.
The utility got legislative approval to charge the system's 830,000 customers for the program aimed at improving safety and reliability. But critics say the project has been plagued by delays, mismanagement and budget overruns, and that something needs to be done to contain costs.
Tony Radoszewski, president of the Plastics Pipe Institute, a trade group based in Irving, Texas, doubts the price of the PE pipe is a big factor in the escalating cost of the Chicago project.
“Pipe is one of the smallest components of an installation,” Radoszewski said in a telephone interview. “Labor, machinery and rehabilitation of roads after you tear them up are going to be your biggest costs, not the pipe. In the whole scheme of a project, pipe is one of the lowest percentages of the total bids, and the price of polyethylene hasn't fluctuated that greatly in the last five to six years.”
Yet the cost of this project in Chicago has. Customers could see their utility bills double in the next 14 years, according to Illinois Attorney General Lisa Madigan. However, Peoples Gas says it expects bills to increase by 2.7 percent a year, which is less than her estimate.
Any rate hikes will be a hardship for some customers. The Illinois Commerce Commission (ICC) faced sharp criticism at its March 1 meeting from low-income residents who contend the board failed to do its job of keeping heating costs affordable for customers already struggling to pay bills.
“My last [heating] bill was $400. That's more than half my rent. …Now I'm getting a part-time job just to pay my gas bill.” preschool teacher Tanya Zato told the ICC, according to Crain's Chicago Business, which is a sister publication of Plastics News.
Zato added that her neighbors are grieving the loss of two small children who died in a house fire where a stove was used for heat.
After listening to public comments, the commission voted unanimously to direct an administrative law judge to review the project and hold hearings about prioritizing gas leaks, reevaluating the budget and determining the average annual impact on customer bills. The scope of the investigation is broad and will delve into why costs remain stubbornly high even after the natural gas utility came under the new management of WEC Energy Group in 2015.
Following the meeting, Peoples Gas issued a statement saying it has made significant improvements in rolling out its system modernization program and it remains committed to working with ICC and stakeholders.
“Our modernization program replaces an outdated natural gas delivery system, which consists of thousands of short segments of cast and ductile iron pipe, some installed more than a century ago,” the statement says. “The benefits of the program will result in Chicagoans receiving the safe, reliable and modern natural gas distribution system they deserve.”
Customers deserve fair rates, too, according to the Citizens Utility Board, a non-profit watchdog group created by the Illinois legislature in 1984 to represent the interests of residential and small business customers. CUB officials issued a March 1 statement in support of the additional hearings.
“The pipeline-replacement project is on an unsustainable path that will be devastating to Chicago customers unless there are significant improvements to the status quo,” the statement said. “We have to get this program under control, and CUB looks forward to working with state regulators to hold the company accountable to preserve safety and contain costs.”
Based in Milwaukee, WEC Energy Group acquired Peoples Gas and other Midwest utilities from Chicago-based Integrys Energy Group in 2015.