Business News

Illinois Attorney General Wants Investigation Into Peoples Gas Pipe Project

An independent audit of a gas pipe replacement project proposed by People Gas has found that costs are likely to be over three times the original proposal. Even more concerning is the probable cover up that has been going on for almost a year. Illinois Attorney General Lisa Madigan is calling for an investigation into the program.

In 2009, Peoples Gas proposed a $2.6 billion project replacing about 2,000 miles of old leaky iron pipes with new plastic ones. Since then, the project cost has increased over three fold to more than $8 billion. That works out to a cost of about $7,700 for each of the utilities 831,000 Chicago customers according to the Chicago Tribune.

The cost discrepancy was discovered during an audit by the Illinois Commerce Commission (ICC) after a merger between Peoples Gas’ parent company, Integrys and Wisconsin Energy Corp. this past summer.

During the talks prior to the merger, the massive overrun was never revealed by Peoples Gas. The updated projected cost was announced after the purchase was approved by the commission.

The Chicago Sun-Times reports that Madigan’s office filed two petitions with the ICC. One is requesting an investigation into whether withholding the information about the cost estimate violated the Public Utilities Act and the other calls for the program being restructured.

One of the petitions claims that had the information been disclosed beforehand, the commissions’ decision may have been different.

[It] could have changed the outcome of the commission’s ultimate determination in the merger… or, at a minimum, the conditions upon which the merger was approved. If the commission fails to act when confronted with evidence of possible omissions or misrepresentations, it could send a dangerous signal to all regulated entities that one way to avoid regulatory consequences is to withhold potentially unfavorable information.

A spokeswoman for the newly merged company, Jennifer Block, claims that once the new management team saw the issues with the project, they put a team together to review it and will have results for the ICC by the end of the month.

As soon as Wisconsin Energy acquired Peoples Gas, our new management team began to take aggressive actions to improve the oversight and performance of the project. After the acquisition closed, our new management team learned that the previous outside contractor had developed an estimate showing that the program cost might rise to as much as $8 billion over the 20-year period.

We did not have confidence in that estimate. We have now assembled an experienced construction management team and hired a nationally known firm to develop a bottoms-up cost and scheduling model. We will provide the results of that review to the Illinois Commerce Commission by November 30th. We will continue to cooperate with all stakeholders, including the Illinois Commerce Commission and IL Attorney General.

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