Illinois regulators last Wednesday voted unanimously to continue what is turning out to be a multi-year investigation of the multi-billion-dollar, 20-year effort by Peoples Gas utility in Chicago to replace more than 2,000 miles of aging pipelines that have become more albatross than opportunity for Milwaukee-based WEC Energy Group Inc.
Since themergerof Wisconsin Energy Corp. and Peoples’ parent Integrys Energy Group two years ago, the proposed Chicago pipe replacement has quadrupled in estimated cost, from slightly more than $2 billion to more than $8 billion. WEC Energy inherited what its then-CEO Gale Klappa called “one of the largest infrastructure modernization programs in the country,” a 20-year effort to eliminate any remnants of cast iron distribution pipe.
With the new regulatory order, Peoples Gas is required by the end of this month to submit a new plan for the modernization of its pipelines.
Under previous management, the effort got off to a rocky start, causing the Illinois legislature and state regulators to intervene, and with WEC’s creation the project was given a fresh look internally, too.
After several years of oversight and examination, the Illinois Commerce Commission (ICC) has initiated a proceeding to formally investigate the cost, scope, schedule and other issues related to the gas modernization program that originally was dubbed the “Accelerated Main Replacement Program.”
ICC Chairman Brian Sheahan promised the regulatory action would mark the start of an “improved” main replacement effort, calling the task ahead “critical to consumer reliability and safety.” Wednesday’s order aims at increased transparency and policies leading to a better managed and cost-effective program, Sheahan said.
The latest regulatory full-court press follows a December 2015 suspension of the former “accelerated” program and a series of stakeholder workshops last year to reassess the rate coverage for the massive infrastructure replacement effort. Along with the ICC and People Gas representatives, various stakeholder groups have been involved in the workshops, including the local gas utility workers union Local 18007, the Citizens Utility Board (CUB), City of Chicago, and the Illinois Industrial Energy Consumers.
Calling the past program mismanaged, CUB urged the regulatory commission to come up with a sound decision on how to improve the beleaguered program. “The pipeline replacement project is on an unsustainable path that will be devastating to Chicago consumers unless there are significant improvements to the status quo,” said a CUB spokesperson. CUB’s consumer protection-minded officials said they look forward to working with state officials to “hold the company accountable” for both safety and cost containment.
Calling for a “fresh start,” WEC Group senior executives established an in-house construction management group with extensive project experience after the merger, but that has not quelled the concerns of the ICC and state lawmakers.
The project originally kicked off under Peoples Gas management nearly eight years ago, when the ICC approved the replacement of 2,000 miles of aging cast iron gas mains with leak-resistant plastic pipe by 2030, a 20-year infrastructure effort.
CUB officials said that in addition to its criticism, the program has been lambasted at times by the Illinois Attorney General’s office, whistleblowers, and an ICC-ordered audit that showed the program had been mismanaged, inflating earlier projected costs to the $8-10 billion range in recent years. According to CUB, the program now can’t be finished until 2035-40.
Illinois Attorney General Lisa Madigan has warned that consumer gas utility bills in the city could double under the program.
Last May, the ICC approved an $18.5 million settlement among WEC Energy, Madigan’s office, and CUB, resolving investigations of whether People Gas, its former parent Integrys, and new parent WEC senior management knew the estimated pipe replacement costs had skyrocketed so much in violation of the state public utilities act.
Ongoing, consumer groups are monitoring program costs for future attempts to seek possible customer refunds.
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