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Peoples Energy: Denial of Weather Normalization Adjustment Plan 'Shortsighted'

June 20, 2005
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Peoples Energy said last week that it is "disappointed" in a ruling by the Illinois Commerce Commission (ICC) that denies its "creative solution" for a Weather Normalization Adjustment (WNA) that would have helped to stabilize the service charge portion of a customer's natural gas bill in Illinois during colder and warmer than normal winters.

The company filed a short notice petition in April asking the commission to approve the WNA so that it could be implemented for the upcoming winter. In denying the petition, the ICC cited concerns about "single issue" ratemaking and suggested the petition is best considered in the context of a more extensive rate proceeding. Peoples noted that despite the denial, the commission was supportive of the concept and the benefits it provides customers.

"We are discouraged by the Commission's action," said Kathy Donofrio, senior vice president, Peoples Energy. "Weather normalization tariffs are in place at 37 utilities in 19 states and are a progressive way to mitigate the impact of weather on customer bills and company earnings and cash flow. Since the rate making process assumes normal weather, we do not believe a full rate proceeding is needed to approve this 'revenue-neutral' mechanism."

Peoples said the biggest benefit to customers of WNAs -- which have been in effect since the 1980s in other states -- is price stabilization of the service charge portion of their bills. "Customers have repeatedly told the company that price stabilization is very important to them to allow for proper budgeting and management of their energy needs," Peoples said. "While Peoples Energy utilities attempt to mitigate price volatility of the gas charge portion of the bill through their hedging programs, a WNA would provide a 'hedge' for the non-gas charge portion of customers' bills. This would help to offset the compounding effect on customers when cold weather is accompanied by high commodity prices."

Peoples said it conducted meetings, responded to data requests and hosted workshops to educate, communicate and facilitate the approval of the proposed WNA, but the commission and intervenors suggested a rate case proceeding would be a better venue for reviewing the benefits of the program.

"Peoples Energy considers this viewpoint shortsighted but will now consider the recommendation to pursue strategies to provide customers stability and improved safe and reliable service through a general rate proceeding," the company said.

Peoples Energy is a diversified energy company comprised of five primary business segments: Gas Distribution, Oil and Gas Production, Power Generation, Midstream Services, and Retail Energy Services. The Gas Distribution business serves about one million utility customers in Chicago and northeastern Illinois.

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