Peoples Gas projects 15% rise in Chicago heating bills in winter 2020


Peoples’ assessment depends mostly on an assumption that winter will be normal rather than like the balmy season Chicagoans experienced the year before. That would mean more gas consumption, raising costs.

But the increase easily could be significantly higher, judging by how winter natural gas markets are shaping up. Natural gas futures for November through March currently are running nearly 50 percent higher than the same period the year before.

Peoples says it’s too early to project prices. “As of early August, based on normal weather, we projected that customers would be paying $765 for the November-March period,” Peoples spokeswoman Danisha Hall says in an email. She says the utility will update its outlook in October.

That projection took place before gas futures spiked in August. They have stayed roughly at those levels since. Especially in the coldest months of December through February, futures are considerably higher than the year before, averaging 32 cents per therm. That’s 60 percent higher than the 20 cents in the previous year over those months.

Winter gas prices in recent years have been unusually low; in the past, they would typically increase, reflecting higher demand. What changed was historically high gas production, which kept storage facilities full leading into the cold-weather period and reduced spot purchases.

This year, though, gas production fell off as drillers reacted to low oil and gas prices. That’s caused the spike in futures.

This creates the potential for a harsher affordability crunch in Chicago, where low-income households struggled to pay heating bills even when gas prices were historically low. The low gas prices have kept heating bills from otherwise soaring due to persistently higher delivery charges, stemming from Peoples’ multibillion-dollar pipe replacement program and system overhaul. Even with the cost of the gas itself remarkably low, Peoples has broken records in each of the past two years on its level of unpaid bills.

Peoples doesn’t suffer from the cost of those uncollectible accounts. State law allows utilities to recover those in annual surcharges imposed on their ratepayers, and those costs now exceed $4 a month in Chicago.

Peoples points out that about half of the gas it sells to Chicagoans in the winter comes out of storage, which is bought ahead of time. In this case, that gas is considerably cheaper than the additional fuel Peoples will need to buy to meet demand. That will soften the blow if prices remain elevated.

But theoretically it means that a 50 percent cost increase will be more like 25 percent—still substantial. (Like all gas utilities, Peoples doesn’t make money on the commodity; it sells the fuel at cost and profits on delivery charges.) That would add about $53 to a projected winter gas bill that’s already $100 higher than the previous season’s.

The same dynamic will affect heating bills in the suburbs. So far, Nicor Gas, which serves 2.2 million suburban customers, projects that heating bills will rise only modestly, to about $465 over the five-month heating period for the average household versus $444 the previous year. That projection, however, assumes the area will experience the same warmer-than-normal winter it did last season.

As in recent years, the average city household will pay about two-thirds more than the typical suburban resident.

Nicor, like Peoples, could be underestimating the cost if gas prices in the winter months don’t moderate. About a third of the gas consumed by Nicor customers comes from storage and is purchased ahead of time. But that leaves two-thirds at winter prices.

“There are more than the two factors (market and storage price) that go into our price forecasting,” Nicor spokeswoman Jennifer Golz says in an email.

Gov. J.B. Pritzker has called for eliminating gas utilities’ ability to impose monthly surcharges on customer bills to help cover the cost of accelerated infrastructure programs—mainly replacement of aging pipes. In Peoples’ case, that extra charge exceeds $10 a month. Legislation to do so is pending in Springfield.

Peoples says a monthly charge ends up being cheaper for ratepayers than traditional rate hikes and that a recent state-commissioned engineering study affirmed the need to replace the pipes quickly.

Meanwhile, Peoples is on pace to record nearly $80 million in unpaid bills by year’s end, by far a record. That equates to nearly $7 of every $100 Peoples collected—or tried to collect—from customers last year.



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