When it comes to the cost of staying warm, brace for a winter of discontent.
Natural gas prices are at their highest levels since the winter of 2008-09—double what they were last winter. Gas utilities in the area project that heating bills from November through March will be 35% to 50% higher than last season.
For the average Chicago household, assuming normal winter weather, the five-month heating bill will be around $938, or $188 a month on average, according to a Crain’s analysis, using data from Peoples Gas combined with gas-price futures. The projection jibes with what Peoples anticipates, a spokeswoman said.
That would be a 35% increase over last year’s average household gas bill over the official five-month heating season of $693, or $139 a month.
The increase is expected to be higher in the suburbs. Nicor Gas projects a five-month heating bill for the average household in its vast suburban territory of $674, or $135 a month. That’s up 48% from $455 last season.
These bills may come as a shock to residents, but this situation has been years in the making with no shortage of warnings. Peoples, which serves the city of Chicago, and Nicor both are charging far more than they used to for delivering the fuel to homes and businesses. That’s thanks to unprecedented infrastructure spending, which they recover from ratepayers and on which they profit. Historically low gas prices over the last several years—utilities don’t profit on commodity purchases and pass those along to ratepayers at cost—have helped blunt the financial impact for ratepayers.
But rock-bottom commodity prices don’t stay that way forever. Now the companies and regulators must gird for an affordability crisis, particularly in the city.
“So many people in the city are having trouble paying their bills as it is,” says David Kolata, executive director of the Citizens Utility Board, a consumer advocate. “This is a reckoning that was just waiting to happen. The infrastructure investments that were so out of control have been somewhat hidden.”
Nicor’s projection doesn’t include the impact of an additional pending rate hike—the Illinois Commerce Commission must decide on it by December—that the utility says will cost the average household more than $5 a month. For the winter, when usage is higher, that monthly impact will be steeper than that.
It will be the third rate hike for Naperville-based Nicor, which serves more than 2 million homes and businesses, in four years.
Peoples has taken a different tack, annually hiking a monthly surcharge free of immediate regulatory oversight to cover the costs of its expansive gas-system overhaul. That cost now is about $13 every month for the average Chicago household—more than 10% of their yearly bill.
Gov. J.B. Pritzker proposed ending the surcharge early (it’s scheduled to expire in 2023) in his wide-ranging energy bill, but the version he signed into law earlier this month didn’t address the issue. Opposition from unions benefiting from the utility work has kept the surcharge alive despite criticism from consumer advocates and evidence that large swaths of the Chicago population can’t afford their gas bills.
For the utilities, there’s no financial risk to an affordability crisis because they don’t bear the costs of unpaid bills. Those are passed along to ratepayers under state law.
One result is record-breaking earnings every year. Peoples, which is owned by Milwaukee-based WEC Energy Group, posted $144.4 million in net income through June, up 13% from $128 million at the same point last year. This year’s six-month total is more than Peoples made in the entire year of 2018 and any year before that.
Exacerbating matters is that the utilities still are recovering what they paid for gas last February when prices spiked due to the weather emergency in Texas. Peoples’ gas charge for October is 73 cents per therm, more than triple what it was in October 2020. The average Chicago household will lay out $22 more for gas if October weather is normal.
Those extra charges for last February’s price shock will continue until January.
The obvious pain to come surely has policymakers scrambling to manage a far worse situation than they’ve seen in years, right? But there’s little evidence of that so far.
The ICC, which regulates utilities, later this fall will conduct its normal “winter preparedness” session with utilities. “As we prepare to enter the cooler months this year, the ICC will maintain open lines of communication with the utility companies to make sure we are up to date with their own internal and collective efforts to aid customers,” spokeswoman Britney Bouie says in an email.
Pressed on whether the ICC will do something more than the ordinary, she says the winter preparedness session “is more critical than before.”
Peoples says it has $6 million available for emergency bill support, half the $12 million that was set aside last year because of the pandemic. There could be more federal support as well, spokeswoman Danisha Hall says.
But she defends the need for the continued infrastructure spending, calling it “a crucial safety priority in light of findings that 80% of the pipes in Chicago’s system have less than 15 years of useful life remaining.”
As for Nicor, “We understand that the increasing market price for natural gas is higher than those historically, which is why we continue to offer multiple ways to support our customers now and into the future,” spokeswoman Jennifer Golz says in an email.
Nicor soon will unveil a new multiyear partnership with the Salvation Army to offer more aid to those struggling with their bills, she says.
It’s September, and the weather only is starting to cool. The temperature on this issue likely will get hotter, especially if the winter turns out to be colder than normal.