Peoples Gas files rate hike request - Increase would be first in 12 years; CUB vows scrutiny

Peoples Gas files rate hike request - Increase would be first in 12 years; CUB vows scrutiny
By Jon Van
Copyright © 2007, Chicago Tribune
Published March 9, 2007, 8:52 PM CST

Peoples Gas filed a rate increase request Friday with the Illinois Commerce Commission that the company estimated would raise residential gas bills, on average, as much as $120 a year for Chicago customers who heat their homes with natural gas.

The firm's parent, Integrys Energy Group Inc., also filed a rate increase for North Shore Gas customers that it estimated would amount to an average of as much as $60 a year for those customers who use gas to heat their homes.

The companies said last month that they would file for rate increases. Peoples President Desiree Rogers emphasized that it has been 12 years since the firm filed for an increase in the rates it charges to deliver natural gas.

"We have cut our costs during those 12 years, reducing staff and automating processes, to keep prices down," Rogers said. "But you can only cut so much."

The rate increase would raise about $102 million a year from Peoples customers and $6.5 million from North Shore customers.

Customer gas bills have been rising significantly in recent years because the price of natural gas has gone up, but charges for delivery have remained fixed, she said. Delivery charges amount to about 20 percent of a customer's bill on average. But delivery is where Peoples makes its money.

Though the ICC has authorized her company to earn somewhat more than 11 percent of its rate base investment, Rogers said actual results have been much below that. In 2006, the firm said it earned 4.2 percent on its rate base investment.

Energy conservation has played a role, she said.

In the last dozen years, Peoples customers have cut their consumption of natural gas by about 25 percent by insulating their homes, dialing down thermostats and other conservation measures.

"Using less gas is good," Rogers said. "We encourage that, but our fixed costs to deliver the gas don't change when people use less. We need a rate structure that will cover those fixed costs."

Consumer advocates vowed to closely examine the rate hike request and to oppose any increases that aren't economically justified.

"This is horrible timing," said Jim Chilsen, a spokesman for the Citizens Utility Board. "Illinois consumers are facing an energy crisis. Natural gas costs are climbing and electric bills are skyrocketing.

"Our experts will scrutinize this request and fight every penny that we don't think Peoples deserves. Just because there hasn't been an increase in the delivery rate for 12 years doesn't mean they automatically deserve to get an increase now."

Rogers said the increased funding will help to maintain the 4,000 miles of natural gas pipeline the company owns to deliver gas to about 815,000 customers.

For customers who don't heat their homes with gas but use it to heat water and for cooking, the company estimates that monthly bills on average would go up as much as $48 annually.

The ICC may take up to 11 months to hear testimony about the proposed rate hike, which Peoples said would likely take effect some time in early 2008.

jvan@tribune.com