Illinois Begins Gas Market Probe
As soaring December bills for natural gas use hit the home front
in Illinois last week, city and state officials opened a broad
investigation into the causes of skyrocketing prices and made
attempts to increase assistance to low-income households.
Spurred by the urgings of Gov. George H. Ryan and various
legislators, the Illinois Commerce Commission voted 5-0 to open an
investigation into this winter's price spikes. The ICC also
directed its staff to put together a report in 60 to 120 days.
Chicago and suburban mayors, who gathered last Monday to support
extension of the assistance program, also called on the ICC to
initiate an emergency rulemaking to investigate natural gas pricing
by the state's gas companies. The action follows the governor's
creation of the state's first ever Energy Cabinet last week, and
his call for a gas price investigation.
"Recent developments and volatility in the energy market
experienced by the citizens of this state and nationally
demonstrate an immediate need to create a framework for handling
energy-related issues in the most effective manner," Ryan stated.
The energy cabinet will be co-chaired by the governor's senior
advisor on environment and natural resources and his senior advisor
on regulatory affairs and will be comprised of key members in
"I call on the ICC to complete a full investigation of the
recent natural gas price increases. Although, to date, natural gas
utilities have been cooperative, we need assurances that Illinois
consumers are not being taken advantage of," the governor said.
Commission spokesman David Farrell said a series of hearings on
the utilities will be held starting on Jan. 18. Another meeting is
tentatively scheduled for Jan. 24 with producers.
"This is not a witch hunt, or total fishing expedition," Farrell
said. It is to receive "assurances that people in Illinois are not
being taken advantage of." The spokesman said he believes the
investigation will reveal that it is simply the way the market
works. "The prices were not there, nobody drilled, all kinds of new
uses for gas emerged, the economy took off, and we have more
housing stock under construction within the last five years than
probably during the previous 20."
In addition to the special investigation, the commission also
asked its staff to expedite its annual prudence reviews of Illinois
LDC's gas purchases for the past 12 months.
"This year, of course, it will be different, because everyone
including their sister and brother will be in reviewing and asking,
'were you consistent with the market generally,'" Farrell said. He
pointed out that these reviews can normally take a year or more,
but the commission asked for the 14 different prudence reviews to
be completed by the end of the calendar year.
The focus on natural gas prices by the mayors' coalition is
being led by Chicago's environmental office, which contends
distributor Peoples Gas acted imprudently in failing to hedge. The
distributor "has the tools to hedge, but it did not," a spokesman
for the environmental office said. Peoples rates to residentials
currently are $9.70 MMBtu. "While industrial customers locked in
purchases last summer, the city did not. They should have seen this
coming and done something similar." The city will pursue its
challenge in the annual rate review coming up in the spring. Part
of that challenge will include whether the diversified businesses
of parent, Peoples Energy, which has an E&P subsidiary,
conflicts with its role as a utility.
Robert J. Kelter, director of litigation for the Citizens
Utility Board (CUB), said, "I would be surprised if very much comes
out of these hearings. I assume that they are going to ask people
to give testimony, but I am not sure what a public interest group
can say. Prices are way too high, the market is out of control, and
consumers are getting screwed." Kelter said. CUB asked the ICC to
order Peoples [Gas] to start hedging more, but the commission did
not do it. He said if the commission had listened it might have
prevented some of the current problems.
Kelter said he hoped the investigation would delve into whether
affiliates of Peoples Energy and Nicor Gas were purchasing gas at
better prices than their utilities. "If the utility's affiliates
have been able to purchase gas cheaper than the utilities
themselves, we want to know why."
Once the special investigation is completed sometime this
spring, a final report including transcripts from the hearings and
accompanying recommendations will be forwarded to the Energy
Cabinet which Ryan formed earlier in the week. The report will then
be forwarded to the governor, and then on to the general assembly
in an effort to develop guidelines for a statewide energy policy.
Kelter remains pessimistic about the investigation, "I don't see
the ICC doing a thorough investigation on whether gas producers are
gouging Nicor and Peoples in some way," he said.
In a related action, ICC Chairman Richard Mathias asked the
Federal Energy Regulatory Commission to look into whether the
prices charged by natural gas pipeline companies to LDCs are the
same as those published rates on file with the federal agency.
The Illinois legislature voted early last week to expand
eligibility requirements, allowing an additional 47,000 families in
the state to apply for the Low Income Home Energy Assistance
Program (LIHEAP). The legislative action extends the LIHEAP program
to families with incomes of less than 150% of the poverty level, or
$25,575, up from the previous 125% or $21,312 limit. The 150% is
the maximum allowed under the federal-state program.