Peoples Gas Asks for Bigger Rate Hike

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Peoples Gas has boosted its requested rate hike of last July by 31 percent.

The natural gas utility, which serves the city of Chicago, now is seeking additional revenue of $102.7 million, which it says would add $8.40 per month to the average weather-normalized residential bill of $88.83. That would be a 9 percent increase.

When it originally filed with the Illinois Commerce Commission in July, Peoples sought a $78.3 million rate hike, which would have meant a $6.50 increase to the average monthly bill.

The utility says the cost of complying with new regulations from the city Department of Transportation accounts for more than half of the increase in the request.

It’s also ramping up a pipeline safety program that attempts to keep gas pipes from crossing sewer pipes in order to avoid natural-gas accidents due to sewer work.

Peoples says it also has encountered unexpected costs in its program to replace the aging cast-iron gas mains underneath the city’s streets. The utility plans to complete the pipe replacement program over 20 years at a total cost of $2.5 billion.

In a Nov. 6 conference call with analysts, Charles Schrock, CEO of Peoples’ Chicago-based parent Integrys Energy Group Inc., said Peoples this year would replace no more than 135 miles of underground pipe rather than the 200 miles it planned. And he hinted that the rising costs could lift the project’s $2.5 billion price tag.

“What we’re seeing are some increased requirements from the city of Chicago as well as some changes in processes that we made for good reasons, but it increased the costs per mile,” Mr. Schrock said.

A Peoples spokeswoman clarified later that the company hasn’t officially changed its final price tag of $2.5 billion.

The spokeswoman says the company knew of at least some of the higher costs in July when it first filed its rate request. The utility probably would have waited to file with the ICC until it had a better idea of what those costs would be, but it was required by state law to act in July.

That law, which authorized construction of a $3 billion coal-to-gas plant in an economically on Chicago’s South Side, required the state’s largest gas utilities to file for rate reviews every two years if they didn’t agree to purchase the high-priced synthetic gas from the project. Peoples and sister utility North Shore Gas were the only utilities statewide that refused to enter into a contract with the developer, New York-based Leucadia National Corp.

The gas plant now appears to be dead, but the rate requirement remains for Peoples and North Shore.

The ICC must act on Peoples’ rate request by June.

Read more: http://www.chicagobusiness.com/article/20121113/NEWS11/121119957/peoples-gas-asks-for-bigger-rate-hike#ixzz2C7I2KwKI

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