Regulators weigh future of gas industry in Illinois, while clamping down on Chicago utility

CHICAGO – Natural gas is fueling a fight between consumer advocates, a powerful utility company and the state. Amid competing advertising campaigns, accusations of mismanagement and state decarbonization efforts, the Illinois Commerce Commission is starting a process that will shape how the state regulates the increasingly controversial industry.

While Chicago considers passing an ordinance to ban natural gas in some new building construction – following the lead of places like New York City and Seattle – state officials are moving more slowly in an attempt to ensure Illinois meets its goal of having 100% renewable energy by 2050.

The ICC launched a process dubbed the “Future of Gas” last week that will inform the governor, legislature and other policymakers on potential policy changes. The process was initiated by the ICC after they tamped down requests for rate increases from all of the state’s major gas utilities.

“We need to get this right,” ICC Chair Doug Scott said at a virtual workshop with more than 350 advocates and industry officials last week. “We get one really good shot at this.”

He added the process “is not designed to meet a pre-ordained conclusion.”

Rob Kelter, senior attorney at the Environmental Law and Policy Center, praised the new approach to regulation and Scott’s personal attention to the proceeding while welcoming the fact that these discussions are happening outside of a traditional rate case, where utilities have more say in setting the agenda.

“Everybody pays gas and electric bills and also everyone is affected by the current gas and electric systems,” Kelter said.

Both electric and gas companies are involved with the “Future of Gas” proceeding, which is expected to last until summer 2025, although the precise timeline and the scope of what will be discussed are still tentative.

“What I hope will result from this is a lot of good, productive discussion that objectively analyzes the state’s options for reducing carbon emissions,” Kelter said.

A spokesperson for Peoples Gas, Chicago’s natural gas utility, echoed that sentiment and added the state’s gas distribution system will play a major part in reaching the state’s climate goals.

“Natural gas, along with emerging technologies such as Renewable Natural Gas and Hydrogen, will be critical to meeting Chicagoans’ need for reliable, affordable, decarbonized energy,” Peoples Gas’ David Schwartz told Capitol News Illinois in a statement.

Schwartz pointed to technological developments in capturing natural gas from waste products like food, using new gas-powered appliances for heating buildings and the ongoing replacement of pipes as steps that would reduce or even eliminate the gas system’s carbon footprint.

But Kelter said he is skeptical of the claims made by boosters of the new technology – a position shared by other environmental and consumer advocates.

“The state has climate goals that require us to change how we heat and cool our homes,” he said. “We’ve got to move toward a system that’s reliant on renewable energy.”

Peoples Gas faces scrutiny

While the ICC weighs the future of the gas system generally, it’s also investigating the current state of Peoples Gas. The company’s controversial “safety modernization program,” designed to replace Chicago’s aging pipe infrastructure, was put on notice in November, when the ICC paused any spending related to the program and began an investigation into it.

That investigation began in earnest last week, with Peoples Gas filing its first testimony in the case. The company was also granted a rehearing on the decision to pause spending after it claimed some work was still necessary.

The investigation is expected to last until January 2025, while the rehearing will last until late May or early June 2024.

Consumer advocates have praised the decision to shorten the leash on Peoples Gas’ pipe replacement program, while also recognizing the need to replace Chicago’s natural gas pipes – some of which are more than 100 years old.

But Abe Scarr, the head of the consumer advocacy group Illinois PIRG, said the program’s costs have grown, in part, due to Peoples Gas conducting other work under the guise of replacing old pipes or “emergency” repairs.

“I think it’s pretty clear Peoples Gas hasn’t really kept to the scope of that work,” Scarr said.

Schwartz, of Peoples Gas, said the company provided options to the ICC for reducing the scope of the work or more narrowly targeting the program when the company can begin work again.

“We will continue to seek authorization to move forward with the needed work,” Schwartz said. “Modernization of Chicago’s underground energy delivery system is crucial for the safety, reliability, affordability and environmental sustainability of Chicago’s heating system.”

Fallout from ICC decisions

Since the ICC’s bombshell rulings in November limiting several utilities’ rate requests and investigating Peoples Gas, one labor union launched a pressure campaign on the commission and the governor urging them to walk back some of the decisions.

The International Union of Operating Engineers Local 150, which represents about 23,000 members in Illinois and neighboring states, launched a series of advertisements claiming that the decisions were a “natural gas ban” and urged prioritizing pipeline safety in the transition to a cleaner energy system.

“I don’t think any of us have seen enough facts in front of us to say that the natural gas system will be obsolete,” Local 150 spokesperson Kristine Kavanagh told Capitol News Illinois.

Because of the decision to pause Peoples Gas’ infrastructure spending, Kavanagh said about 200 members of her organization lost their jobs in addition to hundreds more in other unions.

While the union endorsed JB Pritzker in his most recent general election in 2022, his campaign organization launched a series of response ads pushing back on the union’s claims.

“At a time when too many working families are struggling to pay their heating bills, the governor knows that putting their bottom line ahead of that of a record-profit-earning utility is the right thing to do,” Pritzker campaign spokesperson Christina Amestoy said in a written statement.

The back-and-forth ads between the union and the Pritzker campaign illustrate a potentially growing fight between the governor and one of the Democratic Party’s core bases of support.

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of newspapers, radio and TV stations statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.