The Citizens Utility Board (CUB) in Illinois said it is asking the Illinois Commerce Commission (ICC) to reverse a ruling by two ICC administrative law judges and fine the Nicor Gas $27 million for allegedly lying to the state agency about a complicated ratemaking scheme the company used to defraud consumers.

The motion, which was first filed in February, argues that a stiff penalty was needed to show Napersville, IL-based Nicor and other utilities that lying to the commission will not be tolerated. Earlier this month, however, the two administrative law judges handling a review of the Nicor matter ruled that the ICC lacked the authority to penalize the company.

Filed jointly by CUB and the Cook County State’s Attorney’s Office, the latest motion asked the five-member panel to reverse that ruling and order the fine (see NGI, May 12).

“The gravity of this issue cannot be overstated,” CUB Litigation Director Robert Kelter said. “How can the public have any faith in the ICC or in the ratemaking process if utilities are allowed to lie and mislead the commission and then face no consequences for those actions, even when they get caught red-handed.”

At the root of the complaint, CUB questions Nicor’s actions in promoting its performance-based regulation (PBR) plan, which was approved by the commission in 1999. The company discontinued the plan Jan. 1, in the wake of a scandal surrounding a 14-page memo from a company whistleblower who alleged the utility had used the plan to overcharge consumers.

CUB, a non-profit Illinois utility watchdog, said it received that memo last summer and used it to prod the ICC into conducting an expanded review of the Nicor program. During that investigation, CUB obtained company documents that it claims show how Nicor devised the plan as a way to profit off of very inexpensive gas held in storage — at the expense of consumers — and then hide those ill-gotten gains from the ICC.

Nicor argued that the PBR plan motivated the company to seek cheaper natural gas for its customers. However, CUB claims evidence it has discovered shows that Nicor merely intended to use the plan to profit off the release of “LIFO” (last in first out) gas-extremely cheap gas that had been in storage from as far back as the 1950s. Customers would have gotten 100% of the benefit of that cheap gas under traditional regulation, but under the new rate plan, Nicor got to keep half.

CUB said it determined the amount of the proposed fine based on the company’s claim that it had saved consumers $54 million under the PBR plan, to be split equally between Nicor and its customers. “If Nicor had been truthful about the intent of the plan, the ICC, in all likelihood, would have rejected it and the company would have been out its $27 million profit,” CUB said.

In addition to seeking the fine, which would be paid to the state, CUB said it will also be asking for refunds to consumers of all the money they were overcharged. Nicor has estimated it owes customers $15 million because of the scandal, but CUB believes the harm to consumers was much greater and the group is studying other evidence of wrongdoing by the company.

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