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Madigan protests request for gas-rate hike

Updated: January 21, 2013 1:58AM

CHICAGO — Illinois Attorney General Lisa Madigan has filed a protest against Peoples Gas and North Shore Gas rate-hike requests that would push consumers’ rates higher next year, arguing that the utilities can justify only 7.7 percent and 2.4 percent of their respective requests.

The Peoples Gas request for $102.7 million should get whacked by 92.3 percent, to $7.9 million, while North Shore Gas’ request for $12.5 million should be stripped to 2.4 percent of its value, for a $300,000 increase, according to the Attorney General’s office’s testimony filed late Tuesday with the Illinois Commerce Commission.

The argument is preliminary and could be followed with a request for an even bigger cut.

“This is our first take on the problems with the rate-increase requests,” said Ann Spillane, Madigan’s chief of staff. “We now have an opportunity to read what all of the other parties have submitted in their testimony, which may call for even a further decrease in the rates the utilities are looking for.”

“At a time when ratepayers are already struggling, the utilities have offered no support for their extremely high rate increases,” Spillane said.

If approved, the utilities’ request would raise the average North Shore Gas customers’ bills roughly $5 a month, up from the nearly $4 a month under the original request, said Integrys spokeswoman Jennifer Block.

The ICC will rule on the rate-hike requests by July 1, 2013.

The Attorney General’s filing says the utilities based their requests on forecasts of costs in 2013 that project extremely high increases in workforce size and labor costs, overstated costs of debt and equity, and unsupported estimates of Peoples’ costs to comply with Chicago Department of Transportation regulations.

The Attorney General’s office recommended eliminating whole categories of the utilities’ expense claims, including the projected $13.9 million cost of complying with new Chicago Department of Transportation rules governing sites where underground structures such as sewer lines and gas lines cross each other and pose risks when work is done on one of the lines. Peoples Gas never submitted documents to support its expense arguments, the AG’s filing argues, according to testimony from Michael L. Brosch, a consultant hired by Madigan’s office to study the rate-hike request.

Another criticism is Peoples’ claim that it will increase its workforce by 263 workers, or 24 percent, to a total 1,357.

“In my experience, it is highly unusual for a gas utility to expand staffing by 24 percent within only two years,” Brosch said.

The Attorney General’s argument deals only with the costs of natural-gas billing, distribution and customer service. It has nothing to say about the way the utilities purchase natural gas because they pass through that cost to customers with no markup.“

We are in the very early stages of an 11-month process,” Block said, noting that two more rounds of testimony and rebuttal are yet to come.

Consumer watchdog group Citizens Utility Board (CUB) is withholding comment about the rate-hike requests until the ICC reviews them and allows comment. If the ICC decides the utilities acted imprudently, CUB will argue for the ICC to order a refund after the fact, said CUB spokesman Jim Chilsen.

The natural gas utilities, which in July filed requests with state regulators to boost rates $88 million, upped that request again in October to a combined $115.2 million — $102.7 million for Peoples and $12.5 million for North Shore. Integrys Energy Group is the parent company of Peoples and North Shore.

The rates are slated to take effect in June 2013 if the Illinois Commerce Commission approves them.

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