Legislation would end gas surcharge program 2 years early

SPRINGFIELD — Lawmakers have reintroduced legislation that would end a special gas utility surcharge that allows companies to raise customer bills with limited regulatory oversight.

The gas utility surcharge, known as the Qualified Infrastructure Plant, became law in 2013 after similar legislation that benefited ComEd was passed.

House Bill 3941, sponsored by Rep. Joyce Mason, a Gurnee Democrat, and the accompanying Senate Bill 570, sponsored by Sen. Ram Villivalam, a Chicago Democrat, would phase out the surcharge by the end of 2021. It is otherwise not set to expire in 2023.

By ending the program, the legislation would restore traditional oversight of rate hikes. Advocates say the existing charge allows for utility companies such as Ameren Illinois, Nicor Gas and Peoples Gas to bring in revenue at a faster pace than they would with traditional regulations.

Before the surcharge was implemented, utility companies would pay for infrastructure projects first, then ask regulators for approval to recoup the money from customers.

Now with the surcharge in place, a company can begin collecting costs before having to justify the rate increases to regulators.

“The costs have just gone out of control,” Abe Scarr, state director of Illinois Public Interest Research Group, said. “The utilities have incentive to spend as much money as they can because it's basically a guarantee that they'll get it back and guaranteed profits, and they like that. So, what we're seeing over time is these three utilities are spending way more money through this surcharge than was originally planned.”

While consumer advocates say program allows utilities to bypass regulators, utility companies say the program pays for necessary infrastructure.

“These structural improvements facilitated by QIP are a major part of how we have been able to serve our customers through some of the most dangerous and trying periods of inclement weather over the past several years, and specifically over this past year,” Nicor Gas spokeswoman Jennifer Golz said.

Danisha Hall, spokeswoman for Peoples Gas, said there is already strict accountability to the Illinois Commerce Commission.

Natural gas utilities are subject to an audit on the previous year's spending. There's a 4% cap on yearly spending, and utilities are required to file quarterly reports of spending and other details on infrastructure development, Hall said.

“The ICC can look at the spending and reconcile what was spent with anything that they find to be unnecessary or not well spent,” Hall said. “They can literally require us to refund that money to customers. So there is a lot of built-in oversight in the law as it exists today.”

Hall said ending the surcharge program would increase customer costs by requiring borrowing for infrastructure projects.

But according to a report by the Illinois Public Interest Research Group, Peoples Gas, which distributes natural gas to most of the Chicago area, had some of the largest surcharges, and 29% of the company's customers were behind on their bills as of January.

The 818,289 residential customers of People Gas carried more than $146 million of debt to the utility company as of January 2021, while ComEd's more than 3.7 million customers had just $120 million in debt.

Mason introduced a similar bill in March 2020, but it stalled as the pandemic canceled most of the legislative session. She said the General Assembly was told in 2013 by Peoples Gas that the program would cost about $1.14 per month on a consumer bill. But Scarr said at the end of 2020, Peoples Gas customers were paying a fee close to $11 per month, nearly 10 times the predicted average, independent of their energy use.

Advocates of the new bill are concerned that Peoples Gas is not actually spending that money on safety measures and instead using this program for a “huge system overhaul.”

Unlike Ameren and Nicor, which have already replaced all of their cast iron pipe, Scarr said Peoples Gas is far behind in replacing old pipes.

“One of the main safety issues that this (surcharge) was supposed to be about is replacing old cast iron and ductile iron, that's kind of old pipe material that's relatively brittle and will fail, which can cause all different types of problems,” Scarr said. “Peoples Gas still has a lot of that left in its system.”

David Schwartz, another spokesman for Peoples Gas, said that the surcharge is essential to ensuring these pipes get replaced.

“Look at what happened in Texas last month because of underinvestment in natural gas infrastructure,” Schwartz said. “We have pipes in service that are antiquated and deteriorating and are at the very end of their life spans. Some are from the 1800s. We cannot ignore that.”

In early March, about 1,300 Peoples Gas customers in the Logan Square neighborhood of Chicago were without heat for a few days as main gas lines that were more than 100 years old stopped working.