Illinois Approves $82M Nicor Gas Rate Hike Amid Consumer Advocacy Concerns

The Illinois Commerce Commission approved an $82 million rate hike for Nicor Gas on Thursday. Nicor and the attorney general's office negotiated the amount in a settlement that reduced Nicor's original request by nearly two-thirds. The increase is expected to add around $2 a month to residential customers' bills beginning in November. The settlement lowers the monthly fixed charge from $21 to $15. The prior fixed charge applied regardless of the volume of gas used. Nicor serves a large part of northern Illinois, excluding Chicago.

Illinois PIRG Director Abe Scarr welcomed approval of the compromise while saying Illinois PIRG was not pleased with every element. Scarr said lower fixed charges reward energy efficiency and conservation and give customers more control over bills. Environmental Law and Policy Center senior attorney Rob Kelter said the lower charge protects low-income customers, who often use less gas than high-income customers. Kelter said larger users cause more investment in the system and should pay more. Kelter would like the fixed charge to fall to $12 a month or lower. Kelter said Nicor was moving in the right direction and had shown a willingness to improve.

However, consumer advocates called the decision only a partial victory because the settlement adds to previous rate hikes and permits higher profits than advocates sought. The settlement allows shareholders a 9.48% return on equity, between the 8.95% sought by Illinois PIRG and Legal Action Chicago and Nicor's requested 10.35%. Utility watchdog groups had described Nicor's requested return as outrageous and exorbitant.

The settlement negotiated by Illinois Attorney General Kwame Raoul's office included a separate union labor agreement that drew criticism from consumer advocates. The Chicago Tribune's editorial board criticized the agreement as a "nonsensical jobs deal." The labor agreement committed Nicor to maintaining this year's union staffing levels through the end of 2027 and continuing capital investment levels. Infrastructure spending is how Nicor earns profits, as with all public utilities. Consumer advocates fear Nicor could use the labor agreement to argue in a future rate case that the commission had already approved the spending. Consumer and environmental advocates who joined the primary settlement declined to join the labor agreement.

The commission accepted the labor agreement as consistent with the commission's rate-making decisions. However, Commission Chairman Doug Scott said the agreement would not bind the commission in any future matter. Scott said the commission retained authority to judge whether future expenditures and resulting rates were prudent, just and reasonable. Spending above justified levels to meet the labor agreement would still face commission scrutiny before Nicor could pass those costs to ratepayers. Scott said the commission could not dictate who performs work for the utility. Scott said the commission's role regarding workforce commitments was limited to determining whether expenses were reasonable.

Consumer advocates said Nicor had already indicated that the system needed more investment, leading advocates to expect another rate case in January. Nicor did not respond to questions about future rate case plans. Scarr said the increase was Nicor's sixth rate hike in a decade and part of a pattern of excessive spending. Scarr attributed the rapid, significant increases to wasteful spending on unnecessary fossil fuel infrastructure. Scarr said that spending threatened to leave northern Illinois paying for polluting infrastructure for generations. However, Kelter said more frequent rate cases also reflected a regulatory body doing its job. Kelter said the commission scrutinizes every penny utilities request rather than automatically approving increases, prompting utilities to file rate cases more often. Kelter argued that the frequency of cases reflected a strong commission protecting Illinois consumers.