Illinois’ statewide nonprofit utility watchdog, the Citizens Utility Board (CUB), on Wednesday filed a class-action lawsuit accusing Nicor Gas and an unregulated sister company, Nicor Services, of deceptively marketing its “Fixed Bill” plan, which the lawsuit claims has caused some of Illinois consumers’ natural gas bills to more than double. CUB first made the charges of deceptive practices against the Naperville, IL-based company in April (see Daily GPI, April 12).

The lawsuit follows an investigation launched recently by the Illinois Commerce Commission (ICC) concerning Nicor’s performance-based rate (PBR) program, which the company claims followed “reports that an anonymous document was provided to the CUB and the ICC.” Nicor Gas said it is fully cooperating, and will provide additional data on PBR to the commission.

Nicor’s PBR program was approved by ICC in 1999 and launched Jan. 1, 2000 (see Daily GPI, Nov. 29, 1999). It provides an incentive to Nicor Gas to purchase natural gas at costs below a market-based benchmark, while maintaining a safe and reliable supply of gas.

“The PBR has resulted in a two-year savings of $27 million dollars for our customers because we out-performed the market-based benchmark,” said Don Ingle, director of corporate communications. A two-year ICC review of the PBR was established as part of Nicor Gas’ original program. “This review is the appropriate forum for evaluating the PBR and Nicor Gas will continue to cooperate fully in the process.” Ingle said.

Nicor Gas’ approximate annual gas costs are passed on directly to customers without markup. Under the PBR plan, the company’s actual gas costs would be compared to a market-based benchmark. The difference between actual natural gas costs and the benchmark are then to be shared between Nicor Gas and customers. Transportation customers who are not charged any gas costs are not be affected by the PBR plan.

In the lawsuit filed Wednesday in Cook County Circuit Court by CUB and the Chicago law firm of Macey, Chern & Diab, CUB accuses Nicor Gas and Nicor Services of violating the Illinois Consumer Fraud and Deceptive Business Practices Act. It asks that the companies be ordered to accurately describe the “Fixed Bill” plan in its marketing materials and that punitive damages be awarded to customers who were led to believe they would save money under the plan.

Under Nicor’s plan, which was first marketed in the state in March, consumers may pay 12 equal monthly payments, based on their “gas use profile.” However, the lawsuit charges that Nicor doesn’t reveal that the “Fixed Bill” plan sets the monthly amounts “so high that customers are likely to pay far more than if they stayed with the regulated utility.” CUB said a sample of bills found that the plan increased or would have increased annual bills between 88% and 134%.

“Nicor Gas and Nicor Services are deceiving their customers,” CUB Executive Director Martin Cohen said. “The companies promise customers that the ‘Fixed Bill’ plan will protect them from future price spikes — without telling them that the plan itself has a built-in price spike.”

The “Fixed Bill” plan is a Nicor Services program, but Nicor Gas, the public utility, is included in the lawsuit, accused of conspiring with its sister company to defraud customers. Nicor Gas inserted “Fixed Bill” marketing materials into its customers’ billing statements, agreed to add the “Fixed Bill” charges to its customers’ bills and collect those charges, and allowed Nicor Services to use the Nicor trademark to market the plan, the lawsuit alleges.

In June, CUB made similar accusations against Santanna Energy Services, based in Austin, TX. CUB said the marketer used “illegal marketing and billing practices,” and did not adequately disclose the prices, terms and conditions of its service in plain language before customers sign up for that service (see Daily GPI, June 24).

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