Illinois utility regulators can be forgiven if they're suffering a severe case of deja vu.
Just like this time last year, an administrative law judge for the Illinois Commerce Commission has tossed a hot potato in their laps in the form of a proposal handing Peoples Gas virtually everything it's asked for in its breakneck pace of replacing aging gas mains in Chicago.
The utility company is in the midst of replacing more than 1,500 miles of cast and ductile iron pipes with new polyethylene pipes.
ICC Judge Glennon Doyle, in a Dec. 21 ICC filing, proposed affirming Peoples' request to perform $300 million annually of the work, with a goal of replacing roughly 1,600 miles of pipe by no later than 2040. Consumer advocates have provided detailed estimates showing that such a pace could well double winter heating bills by 2030 for the average Chicago household, which already stands at more than $1,000 in a normal weather year.
It was Doyle who this time last year recommended blessing the utility's plan at the time to do essentially the same thing. That caused the ICC to order its staff and Doyle to look harder at the utility's performance, as well as the alarming affordability issues, and come back with a new plan.
In that year, though, Peoples, now a unit of Milwaukee-based WEC Energy Group, has insisted on a pace of work it's never managed in more than three decades of gas-main replacement. The utility also has dismissed affordability concerns, saying a slower pace would put the safety of Chicago's network of gas pipes at risk.
The massive Chicago infrastructure project, whose estimated costs over its lifetime have ballooned to $7.8 billion from $2.6 billion in 2009, comprises about $1.5 billion, or 13 percent, of WEC Energy's $11.6 billion capital spending plan over the next five years. That will drive growth in earnings per share of 5 percent to 7 percent a year, the company tells its shareholders.
Illinois Attorney General Lisa Madigan, the first to raise alarm bells about the mushrooming costs of the gas-main project, has urged regulators to limit Peoples' spending on the project to $130 million a year. That would enable Peoples to manage the complex logistics better and would keep Chicagoans' heating bills from soaring, her office says.
For the ICC, which could rule on the issue as soon as late next month, the proposal from its judge puts it in a quandary, some of which is political. Gov. Bruce Rauner has appointed three of the four commissioners with a vacancy to be filled. Miguel del Valle, the last remaining appointee of former Gov. Pat Quinn, will leave the commission next month.
Chances are there will be just three commissioners, all Rauner appointees, when the ICC acts. If the commission goes along with Doyle's recommendation, Rauner could well be under fire for increasingly unaffordable heating bills in Chicago just as his re-election campaign gets going in earnest.
ICC staff and Doyle both agreed that the commission doesn't even have the legal authority to scale back Peoples' spending, a position the attorney general's office says is legally incorrect.
A 2013 state law authorizing spending on accelerated capital programs gave Peoples and other gas utilities in the state the ability to recover some of their costs via a monthly surcharge on ratepayers' natural gas bills. It's that law that Doyle determined hampers the commission's ability to compel Peoples to reduce its spending.
Instead, the commission only can control spending after the fact, in a review to determine whether the investments were "prudent." If commissioners find a utility has spent inappropriately, they can order it to refund customers. That process is cumbersome and arduous, and regulators ordinarily are loath to use that authority aggressively.
Additionally, Doyle's position raises questions about what the ICC decided last February when it ordered its staff to look precisely at the question of what the proper scope of the program should be. If there's no legal basis for the commission to determine such a thing now, there wasn't back then, either.
In the meantime, the beat goes on. If the project continues as it is, the average household in Chicago will get stuck by 2030 with a winter heating bill of $2,236, more than double today's $1,085, according to Madigan's office.
Think of this: In the notorious "polar vortex" winter of 2013-14, the average Chicago household paid $1,089.50 — a significant spike at the time. That's just four bucks more than they're paying now in normal conditions.
During that brutal winter, Peoples sent disconnection notices to 230,000 customers, more than one in four of its accounts. Of those, 77,000 were disconnected, nearly one in 10.