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Chicago Area Consumers Cutting Back on Gas

Gas customers in metro Chicago and area suburbs both have been reducing the amount of gas they burn through conservation and energy efficiency measures, and the utilities are in the early stages in considering how they might make up for lost volumetric-based revenue.

Over the last 10 years, both metro Chicago's Peoples Gas and North Shore Gas, which serves suburbs to the north, have seen significant reductions in their weather-normalized average use per residential heating customer, according to a recent presentation by the utilities given before the Illinois Commerce Commission's (ICC) Gas Policy Committee.

Usage by residential customers in the Peoples Gas service territory is down about 23% and in the North Shore territory it is down about 17%, according to the utilities' slide presentation. "We're defining conservation changes in normalized use per customer, whether it be permanent (e.g., increased insulation) or temporary (e.g., dialing down thermostat)."

When analyzing tends in consumption changes from 2001 to 2005, the Peoples Energy utilities found that those consuming less gas tended to have:

Those consuming more tended to be:

Whether and how a consumer conserves is influenced by factors such as financial wherewithal, customer attitude and special needs, such as whether there are children or residents with special medical needs in the home. According to the ICC presentation, the poorest and the wealthiest customers of Peoples Energy's utilities are generally not conserving and may be using more gas, offsetting to some degree those who are using less. In neighborhoods where the buildings tend to be newer, the master-metered apartment buildings (where the landlord pays for gas) are conserving, but individually metered customers are using more. The youngest and the oldest customers are not conserving or are conserving less than others, and Latinos generally are conserving less.

While some consumers conserve more than others, and some not at all, the overall net result has been a decrease in consumption, which impacts utility revenues that are based on throughput. This is a problem since utility delivery costs are almost 100% fixed and do not vary with customer consumption. To remedy the misalignment between costs and volumetric revenue, a number of utilities and their regulators have adopted revenue decoupling mechanisms (see Daily GPI, June 14). Others in the industry advocate for a flat rate for distribution service. Each is a different way of skinning the same cat, Valerie Grace, manager of the rates department for Peoples Gas, told NGI."To the extent that you're concerned about rate design continuity, revenue decoupling would work because customers would continue to see a bill with a rate structure that they're comfortable with and you would have this decoupling adjustment that would true up for any variation in customer usage. But when you look at flat monthly charges, that's something that has its own benefits. It gets you to the same place, in a sense, and it's simple because it's just like a cable bill as far as the delivery charge portion...it wouldn't vary from month to month.

"That would offer the customer and the company the most stability. Decoupling offers the same stability, but it involves more steps to get you there because you have to calculate an adjustment."

Grace said Peoples Gas is continuing to look at decoupling as an option. "It's certainly something that's on our radar screen," she told NGI. "We haven't filed anything with the commission to get those type of mechanisms approved, but it is something that we'll continue to talk about."

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