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State grants Nicor record rate hike

Crain's Chicago Business

Friday, November 19, 2021  |  Article  |  Steve Daniels

The $240 million bump is the third increase in four years for the suburban gas utility and will raise winter heating bills even more than the 48% increase already forecast.

State regulators granted Nicor Gas a record $240 million rate hike yesterday, exacerbating what already is shaping up to be the costliest heating season in over a decade.

 

The increase, approved yesterday by the Illinois Commerce Commission, is the third for Nicor in four years and the highest ever for an Illinois gas utility. Collectively, revenue for delivering gas to suburban homes and businesses served by the utility now has increased $501 million since 2018. That’s a 77% increase over that time, according to ICC filings.

 

The sharp hikes are due to unprecedented capital spending to upgrade Nicor’s suburban pipe network. A 2013 law gave the green light to natural gas utilities, particularly Nicor and Chicago’s Peoples Gas, to dramatically ramp up their infrastructure work.

 

It allowed the companies for the first time to charge ratepayers for the work as they did it through monthly surcharges. Nicor has been more aggressive about enshrining those increases in rates via formal regulatory procedures while Peoples has been content to continually boost the lightly regulated surcharge. Peoples' monthly surcharge now stands at more than $13 for the average Chicago household.

 

"This rate increase includes capital investments Nicor Gas has made to modernize its distribution, transmission, and storage infrastructure, ensuring the long-term safety and reliability of service, and improving the overall customer experience," the utility said in a statement. "We realize the impact rate increases can have on our customers, especially those affected by the pandemic and did not make this request lightly. Our goal since the beginning of the pandemic has been to ensure our customers most in need have bill payment and assistance options, and that continues today."

 

This winter, the cost of natural gas, which the utilities pass along to consumers at no profit, has roughly doubled from last season. That’s sending heating bills soaring.

 

Before the rate hike, Nicor projected the average suburban household it serves would pay $674 for heat from November through March—a 48% increase from $455 last season. This hike adds about $3.70 per month to the average bill annually, Nicor said, with more of that absorbed during the cold-weather months than the rest of the year.

 

Next month, Nicor will charge 68 cents per therm for gas. For the commodity alone, that will be a 134% increase over December 2020.

 

Consumer advocates are ringing alarm bells and asking the state to rein in the utilities’ spending.

 

“Gas customers are in dire need of policy reform,” David Kolata, executive director of the Citizens Utility Board, said in an emailed statement. “Illinois must slow down these unsustainable rate increases, implement holistic system planning and stop digging a deeper and deeper hole in support of a fossil fuel that hurts our pocketbooks and the environment.”

 

Gov. J.B. Pritzker called for ending the monthly surcharges in his push for expansive energy legislation this year. But the issue was left unaddressed in the Climate & Equitable Jobs Act that passed in September. Labor unions benefiting from the work have successfully squashed the efforts.

 

The ICC passed the Nicor rate hike on a unanimous vote and without comment.

 

 

Nicor is owned by Atlanta-based Southern, which also runs utilities serving Atlanta and other regions in the South and Mid-Atlantic. Since the start of 2019, when the repeated rate-hike campaigns in Nicor’s territory took hold, Southern’s stock price has risen 41%. That’s far better than the 26% return in the Standard & Poor’s 500 Utility Index.

 

Southern's dividends have risen more than 10% in that time frame.