Dec. 01--Peoples Gas says its wildly over budget project to replace aging pipes under Chicago's streets may not cost quite as much as feared.
Originally estimated to cost $2.6 billion, the huge, multi-decade project ballooned to over $4 billion by 2012 and to more than $8 billion by January of this year. State regulators are investigating whether Peoples Gas executives deliberately hid the $8 billion figure from them for several months this summer to grease the approval of a $5.7 billion merger between Peoples Gas' parent company, Integrys, and Wisconsin Energy Corp.
But late Monday, Peoples Gas' new management filed documents with the Illinois Commerce Commission predicting it will be able to find cost savings that would allow it to complete the project by 2030 for $6.8 billion. That figure, however, would rise to $8.3 billion if the expected savings can't be found, according to the filing.
Peoples Gas is under pressure from the state to get the program under control. Even a $4 billion program would double the base rates its 800,000 Chicago-area customers pay, Illinois Attorney General Lisa Madigan has warned, and ICC commissioners are due to decide early next year whether to approve Peoples Gas' plans.
The utility said Monday that it would prioritize the most urgent work over the next three years, replacing 250 miles of leaky iron pipes in 25 Chicago neighborhoods at a cost of about $800 million. "Peoples Gas projects that the impact for the typical residential heating customer for this work will be an increase of approximately 2.8 percent on their annual bill in each year of the three-year period," according to the executive summary of the filing made late Monday.
The savings would come from stricter management of contractors and speeding up the installation of pipes, it says. For example, meters would be installed at the same time as pipes, preventing delays that have frustrated both customers and the city, it says. It wants state regulators to wait until the three-year period is over before they impose a firm deadline for the project's completion.
"We believe this practical, transparent approach with annual assessments of future costs will best serve our customer and provide Chicago with the safe, efficient natural gas delivery network that it deserves," the company said in its filing.
Transparency has been a sore spot for Peoples Gas, according to ICC commissioners who last month voted to investigate whether executives at Peoples Gas and Integrys deliberately misrepresented what they knew about the anticipated cost overruns of the project.
Had the true details of the project -- which could cost the average Chicago customer $7,700 over the next 20 years -- been known to the ICC, the merger with Wisconsin Energy might not have been approved, Madigan and the Citizens Utility Board had previously said.
Integrys executives were in line to pocket $34 million in stock and cash when the deal closed this summer, according to an SEC filing.
kjanssen@tribpub.com
