While it is not a final decision, two Illinois Commerce Commission administrative law judges issued a proposed order Tuesday recommending Peoples Gas resume its paused pipeline replacement program, with some limits to the scope of the work and two years to file an updated plan.
The order approves a slightly refined approach, which Peoples itself proposed during a yearlong ICC investigation into the long-running project to replace 2,000 miles of aging pipes under Chicago. The utility’s preferred approach would cost a projected $7.2 billion and take until 2040 to complete.
The revised plan eliminates the replacement of 49 miles of large cast-iron pipe, which generally has a longer remaining life than smaller diameter pipe, saving about $330 million from the utility’s original approach. The administrative judges also recommended in their proposed order that Peoples Gas speed it up and get all the work done by 2035.
The five ICC commissioners are expected to issue a final decision on the pipeline replacement program in January.
The proposed program offers “a balanced and cost-effective approach to addressing both immediate safety needs and future system improvements,” the administrative judges said in the order. “One significant benefit of retaining the large-diameter gas mains is the cost savings associated with not having to replace them prematurely.”
The administrative judges also recommended Peoples conduct workshops to allow stakeholders to discuss a new risk assessment plan, explore non-pipeline alternatives and file a petition within two years of the final order and resumption of the work containing an updated plan for replacement of high-risk pipes.
“The conclusions of this independent judge are consistent with what the ICC’s own expert staff, a world-renowned engineering firm, and our own construction crews have been seeing for years,” Bill Mastoris, president of Peoples Gas, said in a statement. “It is critical for safety, and for the reliability of Chicago’s heating system, that this very old system be modernized.”
Launched in 2011, the Safety (formerly System) Modernization Program was originally projected to cost $2.6 billion and take 20 years to complete. Plagued from the outset by delays and budget overruns, the program has already cost $3.3 billion and is just 38% complete, according to the utility.
That puts the total price tag of the program at $10.5 billion if the ICC adopts the administrative judges’ recommended plan. The utility’s 891,000 Chicago customers bear the cost of the pipeline replacement program through their monthly bills.
Last month, the Citizens Utility Board released a Groundwork Data report it commissioned warning that completing the pipeline replacement program would actually cost another $12.8 billion — topping the utility’s projections by more than $5 billion.
The report concluded Peoples Gas would need to impose record-breaking 7% annual rate increases over the next 15 years to cover that cost, effectively doubling delivery charges for its customers.
On Tuesday, CUB issued a statement decrying the administrative judges’ proposed order.
“This recommendation would give Peoples Gas a license to inflict staggering rate hikes on more than 800,000 Chicago households, as our recent report demonstrated,” Sarah Moskowitz, CUB’s executive director, said in the statement. “We urge the full Illinois Commerce Commission to protect consumers already suffering from spiraling heating bills and flatly reject this proposed order.”
Last year, Peoples Gas asked for a record $402 million rate hike for 2024, in large part to continue funding the pipeline replacement program after a 10-year legislative surcharge enabling it to automatically pass the costs along to customers expired. The ICC reduced the rate increase and paused the program for the entirety of 2024 to conduct the investigation.
The replacement program was driven by pressure from the administration of former President Barack Obama to hold utilities across the U.S. accountable for aging pipeline systems following a 2010 explosion in San Bruno, California, that killed eight people, injured 58 and destroyed 38 homes.
But consumer advocates have argued for years that gas pipelines may be obsolete by the time Peoples completes the systemwide infrastructure upgrade, as the shift to electrification and renewable energy sources such as wind and solar gain traction.
The ICC commissioners will have the final word on the future of the pipeline replacement program in January.
