Record Profits for Peoples Gas!

Gas bills hit Chicagoans hard

Peoples Gas, despite record profits, has the most customers struggling to pay their bills of any Chicago-area utility, with the South Side and West Side hit hardest.

By Stephanie Zimmermann

 
Apr 22, 2022, 5:30am CDT

 
WHERE ARE THE MAYORAL CANDIDATES ON THIS ONE?

RECORD PROFITS? IS EVERYONE OK WITH THAT?

Peoples Gas is reporting record profits, but many of its customers in Chicago are still struggling to pay for the natural gas that heated their homes this winter.


In some Chicago ZIP codes, nearly half of all households were behind on their gas bills as of last month, a Chicago Sun-Times analysis has found.

With huge winter heating bills fueled by higher energy costs and a costly, years-long pipe-replacement program, Chicago consumers have been hit hard:


Nearly one-third of all Peoples Gas households incurred a late fee on their bill last month, according to figures reported to Illinois state regulators. That’s far more than other local utilities’ customers. Last year, late fees helped boost Peoples Gas to record profits.
More than 18% of the company’s customers were behind a month or more, as of March, on paying their bills. Altogether, these 150,705 Chicago households, concentrated on the South Side and the West Side, owed $112 million.
Most of the struggling consumers live in Black- and Brown-majority ZIP codes, places already hard hit by the COVID-19 pandemic.

Maria Julia Peña is among Chicagoans feeling the stress of trying to keep up. She wore a sweater and a puffy vest to stay warm in her Brighton Park apartment as she showed her pile of Peoples Gas bills to a reporter. The bill due April 4 had a balance of $415.28.


“I don’t like to be behind on my bills,” Peña said in Spanish, speaking through a translator from Community Organizing and Family Issues, a group that offers leadership skills to working and low-income parents and where Peña works part-time.


The former factory worker, immigrant and mother of six — with three kids, ages 12, 14 and 17 still at home — says she tries to pay some of her gas bill each month. But last winter’s high energy prices made it tough to catch up even as she used electric space heaters and kept her thermostat at 60 degrees.

She’s now on a payment plan, sending in about $121 each month.


“I want to make sure we’re paying it, but it’s been difficult,” she said.


Percentage of Peoples Gas customers 30 days past due
Based on March data

Majority people of color

More than 60% of the population in the highlighted ZIP codes are people of color.
55579090290
Grand
BoulevardRogers
ParkForest
GlenAlbany
ParkMontclareHermosaHumboldt
ParkAustinNorth
LawndaleArmour
SquareThe
LoopLake
ViewPullmanWest
PullmanGarfield
RidgeArcher
HeightsNew
CityChicago
LawnEnglewoodLincoln
ParkAshburnAuburn
GreshamMount
GreenwoodO'HareEdison
Park
Source: Illinois Commerce Commission, Sun-Times analysis of 2020 U.S. Census dataJesse Howe/Sun-Times
The strain on Chicago households comes amid record profits for Peoples Gas. In its latest annual report, released in March, the company announced a record $205 million in net income, driven in part by $29 million in late-payment fees.



Peoples Gas’ exceptionally profitable year in 2021 allowed it to pay $180 million in dividends to its parent company, WEC Energy Group of Wisconsin.

Starting in 2023, the gas company no longer will be able to add late fees to low-income households’ bills. That’s because of a provision in the landmark Climate & Equitable Jobs Act that Gov. J.B. Pritzker signed into law last year.


But consumer advocates worry there’s still more pain ahead for many, as Chicagoans who can afford to switch to electric heat might abandon natural gas.


“Those who can afford it are going to rush to leave, and it’s only going to get worse” for low-income customers left behind, said Abe Scarr, director of the Illinois Public Interest Research Group, a nonprofit consumer advocacy organization.




Maria Julia Peña pores over the fine print of one of her gas bills.


Pat Nabong / Sun-Times


Costly pipeline program

How Chicago arrived at the point where so many are behind on their natural gas bills owes to a combination of higher energy prices and the ambitious pipeline-replacement program that Peoples Gas has been working on for years.


Originally pegged at $1.4 billion in 2007, what the utility first dubbed a “system modernization program” — since renamed its “safety modernization program” — could cost closer to $8 billion to $11 billion by the time it’s finished more than a decade from now.


The utility estimated the program would cost households about $1.14 a month when the Illinois Legislature passed a law in 2013 allowing a special bill “rider” for the work. But now the figure is roughly $150 a year per household and growing.

In the strange world of regulated utility monopolies, the more a utility invests in infrastructure, the bigger its allowable profits. And the pipeline work is OK’d in advance because of the special rider, so there isn’t much incentive to rein in costs, according to critics of the program.

People Gas says that, in addition to replacing old, leak-prone cast-iron pipes, it’s moving the entire system to medium pressure to make it safer and and including automatic-shutoff valves for each building to detect and prevent problems. According to the company, that’s needed to prevent disasters like the explosions and fires that hit about 40 homes in three towns near Boston in 2018.



A People Gas crew installing new pipes in Albany Park in 2019. The utility says the pipe-replacement work is vital to keeping its natural gas system safe.


Sun-Times file

Company spokesman David Schwartz said some of the old, iron pipes date to the 1800s and 83% have an average remaining life of less than 15 years.


“They are at the very end of their useful lives,” Schwartz said. “For the sake of safety, reliability and environmental sustainability, they absolutely must be replaced. We are doing the work efficiently and at the lowest possible cost.”

In past years, the massive pipeline spending was, in a way, masked to consumers by very low U.S. energy prices, so customers didn’t feel as much of a pinch.

That’s changed big-time. In January, Peoples Gas’ stated gas price was about 55 cents per therm, compared to about 29 cents per therm in January 2020.

Natural gas utilities aren’t allowed to inflate their prices for gas. They make money on delivery — and, for Peoples Gas, also on the pipeline work.

Last fall, mindful of the nationwide leap in energy prices, many utilities warned customers the coming winter would be costly. Peoples Gas said to expect a $60-a-month rise in bills over the previous winter — which was on target, Schwartz said.

But other cold-weather locales saw much lower increases in monthly bills this winter. In Minnesota, the average CenterPoint Energy natural gas bill went up about $48 compared over the previous winter.

According to the U.S. Energy Information Administration, the Midwest already suffers more than other cold-weather regions, with household winter gas spending up an estimated 34.6% this year, compared with a 17.9% increase in the Northeast and 21.3% in the West.
Which bills to pay



Maria Julia Peña.


Pat Nabong / Sun-Times

Peña, 51, said she’s had to make tough decisions about which bills to pay.

“I need to go to the doctor, but I’ve been putting off going,” said Peña, who is studying English and computers in hopes of finding a good full-time job to improve things for herself and her children. “I know that this [heating bill] is important. But I’m important, too.”

In her 60632 ZIP code, about 30% of the 22,935 Peoples Gas customers incurred a late fee in March, and 16% were behind a month or more on their bills, according to data filed with the Illinois Commerce Commission.


In Englewood’s 60621 ZIP code, the affordability crunch is worse. There, 59% of Peoples Gas customers got late fees in March. And 47% were behind on their bills by 30 days or more.



Evelyn Lewis, 42, a mother of two boys who gets by on monthly disability payments, said she got heating assistance money through the Community and Economic Development Association of Cook County (CEDA) last year and will try again this year. She says her past-due balances hit $1,200 for gas and about $2,000 for electricity.

“When I leave and take my boys to school, I turn everything off,” Lewis said. “I don’t even use my stove that much.”

The high bills are demoralizing.

“If it’s in the thousands, nobody’s going to be able to pay the whole thing,” Lewis said.



Evelyn Lewis says she gets discouraged looking at her high utility bills, especially after the costly winter.


Anthony Vazquez / Sun-Times

Karen Lusson, a Chicago lawyer with the nonprofit National Consumer Law Center, said the burden is especially pronounced for Peoples Gas customers. The utility had 809,252 residential customers at the end of March, and 150,705 of them, 18.6%, were at least a month behind on their bills.

By comparison, ComEd had 3,733,268 residential customers — four times as many households as Peoples Gas — at the end of March, with 310,366, or 8.3% of them, behind on their electric bills.

The total money in arrears to Peoples Gas was $112,131,385, an average of $744 for each in-arrears household as of March 31. For ComEd, it was $91,954,202 or $296 per household.

“That tells you there’s affordability issue,” Lusson said. “It’s stunning.”

Asked about natural gas affordability, a spokesman for Mayor Lori Lightfoot called on Peoples Gas to help address the high bills.

“It is also troubling that that we have not seen an increase in company-funded customer assistance in Chicago at all in the face of this crisis,” the spokesman said, “especially at a time when companies earn record profits.”


Percentage of customers more than 30 days behind on payments
0%5%10%15%20%Peoples GasNicor GasComEdNorth Shore GasNov.Dec.Jan. 2022Feb.Mar.
Source: Illinois Commerce CommissionJesse Howe/Sun-Times

Overdue bills by utility company
More Peoples Gas customers are behind on their bills than with any other major utility in the Chicago area, based on data from March.
Peoples Gas $112,131,385 31.7% 18.6%
Nicor Gas $68,702,936 20.6% 9.5%
ComEd $91,954,202 17.1% 8.3%
North Shore Gas $4,024,902 18.7% 6.9%CompanyTotal arrears
in dollars% assessed
late free% in arrears
(>30 days)

Source: Illinois Commerce CommissionJesse Howe/Sun-Times


A future with electric heat?

Consumer advocates say the pipeline-replacement work, besides being costly, could be outdated by the time it’s finished in 2035 or later.

That’s because Illinois, as part of its climate goals, is expected to push for more electric home heating through high-efficiency geothermal or air-source heat pumps, said David Kolata, executive director of the Citizens Utility Board, the state’s utilities watchdog.

As wealthier Chicagoans build new homes or retrofit old ones using electric systems, the pool of natural gas customers will shrink, Kolata said.

“People with money are just going to say, ‘Screw it — forget Peoples,’ ” he said. “The people left holding the bag will be the people who can’t afford it.”