A regulatory battle over the subterranean network of century-old gas pipes buried beneath the streets of Chicago is entering the final rounds, with billions of dollars, safety concerns and the future of the city’s energy infrastructure riding on the outcome.
Filings last week in the ongoing Illinois Commerce Commission investigation into the paused Peoples Gas pipeline replacement program heated up arguments over the scope of the massive undertaking, ranging from just repairing leaks to upgrading the whole system.
The ICC put the slow-moving pipeline replacement program on hold last fall, with a decision on its future expected after the investigation wraps up in January.
Consumer groups have long argued that the utility should focus on repairing and replacing the most vulnerable leak-prone pipes, while Peoples has been looking to replace 2,000 miles of aging iron pipes and upgrade from a low- to a medium-pressure gas system. The complete system upgrade has taken years longer and cost billions more than originally projected.
During the yearlong investigation, Peoples proposed a slight refinement of its existing program by eliminating the replacement of 49 miles of large cast-iron pipe, ostensibly saving about $330 million. It dubbed the option the “preferred alternative approach” for continuing the systemwide pipeline upgrade.
Brett Seagle, an ICC staff engineer, filed testimony last week in support of the refined Peoples proposal, which would cost a projected $7.2 billion and take until 2040 to complete.
“Upgrading the company’s low pressure system … is both reasonable and prudent,” Seagle said. “A medium-pressure system offers significant safety features that are not available in a low-pressure system.”
The utility touted the ICC engineer’s findings in a news release Thursday.
“The conclusions by ICC experts confirm what prior research showed and what our own construction teams have been seeing underground for years,” said Bill Mastoris, who became interim president of Peoples Gas in June. “It is critical this very old system be modernized. We must work together.”
Mastoris, a longtime executive with Peoples’ parent company, Milwaukee-based WEC Energy Group, replaced Torrence Hinton, who left after two years in the role to become president of electric utility operations in Ohio for FirstEnergy.
Peoples Gas, which serves 891,000 customers in Chicago, was acquired by WEC Energy Group in 2015.
Launched in 2011, the Safety (formerly System) Modernization Program was plagued from the outset by delays and budget overruns. More than a decade later, the pipeline program is 38% complete. Peoples Gas said it would take until 2040 and cost upward of $8 billion to complete at the time it was paused.
The pipeline replacement program was originally projected to cost $2.6 billion and take 20 years to complete.
Peoples Gas filed for a record $402 million rate hike for 2024, in large part to continue funding its pipeline replacement program after a 10-year legislative surcharge enabling it to automatically pass the costs along to customers expired at the end of last year. In November, the ICC issued an order pausing the pipeline program and reducing the rate increase.
The replacement program was driven by pressure from the administration of former President Barack Obama to hold utilities across the U.S. accountable for aging pipeline systems following a 2010 explosion in San Bruno, California, that killed eight people, injured 58 and destroyed 38 homes.
But consumer advocates have argued for years that gas pipelines may be obsolete by the time Peoples completes the systemwide infrastructure upgrade, as the shift to electrification and renewable energy sources such as wind and solar gain traction.
Abe Scarr, director of Illinois PIRG, a nonprofit consumer advocacy organization, remains hopeful the commission will rein in the program to focus on replacing leak-prone pipes, despite the testimony of the staff engineer.
“I am confident that’s not going to win the day in the case, and that the Commission will take that into account as it should, but will also take into account the testimony of other parties, which calls for a much more significant reevaluation of the program, down to the studs,” Scarr said.
The Illinois attorney general’s office, the city of Chicago, PIRG and other consumer advocates have all filed testimony to the ICC in the case advocating more oversight and a scaled-down approach to the pipe replacement project.
Scarr said the urgency of replacing aging pipes is not in question, but better risk assessment methods and a strategy for targeted repair would be preferable than continuing the broader system upgrade decades into the future, where other forms of clean energy may supplant gas.
“Peoples Gas has a specific problem with old aging pipes … that’s what this program is supposed to be about,” Scarr said. “We’re trying to get refocused on effectively addressing that, and not Peoples Gas’ desire to change its whole system from low to medium pressure. We may not even be using this system in 30 years.”
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