Peoples Energy said it was “extremely disappointed” in orders byIllinois Commerce Commission (ICC) that would sharply reduce thegas rates the LDC and affiliate North Shore Gas could charge theircustomers under fixed-price plans filed last fall. The utilitiessaid they cannot accept the ICC rulings and informed the agencythat they will remain instead under their existing pricingstructure.
“Despite reasonable recommendations from the hearing examiner inthis matter, the Commission chose to set impossibly low rates,”said Thomas M. Patrick, president and COO of Peoples Energy. “Weregret that the Commission did not recognize and seize this primeopportunity to lock in favorable long term gas prices for ourcustomers.”
The fixed gas price would have shielded customers from monthlyprice volatility. Under the current pricing mechanism, customerspay 100% of actual costs and are subject to market fluctuations.Under the fixed gas price proposal, market risks are shifted to theutilities, insulating customers from price instability.
“The fixed gas prices in our proposals would have set gas pricesat rates below the average rates paid by customers over the lastsix years,” said Patrick. “We believe our customers would haverealized savings over the next several years had our proposals beenapproved.”
The ICC hearing examiner’s proposed orders in these two casesstate that the utilities’ proposed charges of 31.08 cents per thermfor customers of Peoples Gas and 31.02 cents per therm forcustomers of North Shore Gas were “reasonable, prudent, andnecessary.” Rejecting the hearing examiner’s recommendations, theICC instead selected much lower fixed rates of 25.63 cents pertherm for Peoples Gas and 27.45 cents per therm for North ShoreGas.
The LDCs said accepting the fixed rates selected by the ICCwould have “endangered the long-term viability of the utilities.Under the rates selected by the Commission, the utilities wouldincur substantial losses or be forced to dramatically reduce coststhat could result in jeopardizing reliability.”
“Our price proposals are far more realistic than those selectedby the Commission, especially considering that gas prices in thecommodity markets are expected to increase during the next fewyears,” said Kathy Donofrio, vice president of rates. Gas priceshave ranged between 22 and 43 cents per therm over the last twoyears, and have averaged 32 cents per therm during that period.Moreover, market analysts predict that prices will average 33 centsper therm for customers, moving forward, Peoples said.
Some analysts, however, expect gas prices in Chicago to fallsharply once the 1.3 Bcf/d Alliance Pipeline project goes inservice next fall.
The ICC apparently considered the impact of the pipelineexpansion in this case and another recent decision made on asimilar fixed-price proposal filed by CILCO. In the CILCO case, theICC lowered CILCO’s requested fixed rates by about 9 cents/therm.CILCO had requested a rate of 36.77 cents/therm in the winter(November-March) and 28.80 cents/therm in the summer, but the ICCreduced the rates to 29.60 cents for winter and 25.88 for summer.CILCO also rejected its order last fall and chose instead tocontinue its purchased gas adjustment mechanism, which sets rateson a monthly basis.
©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.
© 2023 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |