PR Newswire, August 7, 2003
 

CHICAGO, Aug. 7 /PRNewswire/ -- Peoples Energy entered into improper business arrangements, manipulated its storage gas and was lax in its efforts to minimize the record-high gas prices during the winter of 2000-2001, costing consumers at least $109.5 million, or 14.5 percent, in higher gas costs that should be refunded, the Citizens Utility Board (CUB) said Thursday.

Speaking at a news conference, CUB Executive Director Martin Cohen said his group is filing testimony with the Illinois Commerce Commission (ICC) Thursday detailing the overcharges. CUB also will be asking the agency to order refunds for consumers, to be paid on heating bills for the 2004-2005 winter.

"When prices hit record levels during the winter of 2000-2001, Peoples Gas disavowed any responsibility and claimed there was nothing it could do to help customers," Cohen said. "We now know that the company didn't just fail to minimize costs, it took actions that winter that actually increased gas bills for consumers -- actions that were inexcusable."

Cohen said the refund would average $130 per customer, but it would vary based on actual gas usage. The more gas used the larger the refund. CUB is recommending the refund be paid as a credit on gas bills during the winter heating season, when gas prices typically rise.

The ICC currently is reviewing the company's gas purchases for that winter, when gas prices skyrocketed to nearly $1 per therm, causing most customers' winter heating bills to double. As part of that review, CUB commissioned two experts to study the company's purchasing practices.

The first analysis, conducted by Exeter Associates Inc., of Columbia, Maryland, found that Peoples Energy engaged in improper purchasing practices and entered into contracts that raised gas costs for consumers by a total of $56.3 million.

According to the Exeter study, Peoples Energy leased a significant part of its storage facilities to third parties, at a considerable profit for the company. As a result, the utility had less lower cost gas in storage for customers and had to purchase more expensive gas on the spot market instead, costing ratepayers an additional $51.2 million.

In addition, the company entered into an ill-advised gas supply contract with an affiliate of Enron, allowing the disgraced energy trader to manipulate the price of gas it supplied to the utility for storage during the summer. As a result of the contract, Peoples customers paid $2.8 million more for gas stored during the summer than they should have. The Exeter study also documented an additional $2.3 million that should be disallowed, for a total disallowance of $56.3 million.

The second study, conducted by CR Planning Inc., found that the company failed to prudently manage its gas supply and to minimize the huge price spikes to consumers in the winter of 2000-2001. According to the study, the company should have "hedged" at least 20 percent of its gas supply during the winter, a move that would have saved consumers $53.2 million.

Hedging means taking steps -- such as purchasing a portion of winter gas in the future's market -- that can insulate consumers from the volatility of the gas market. By not taking those steps, the testimony concludes, the company acted imprudently and the excess gas costs should be refunded to consumers.

Hearings in the case will be held in December, with an ICC ruling expected sometime next year.

CUB is a nonprofit, statewide utility watchdog organization created by the Illinois legislature to represent the interests of residential and small- business utility consumers. For more information on CUB, visit http://www.citizensutilityboard.org/ or call CUB's Consumer Hotline at 1-800-669-5556.

CONTACT: Pat Clark of Citizens Utility Board, +1-312-263-4282

Web site: http://www.citizensutilityboard.org/

Hedging means taking steps -- such as purchasing a portion of winter gas in the future's market -- that can insulate consumers from the volatility of the gas market. By not taking those steps, the testimony concludes, the company acted imprudently and the excess gas costs should be refunded to consumers.

Hearings in the case will be held in December, with an ICC ruling expected sometime next year.

CUB is a nonprofit, statewide utility watchdog organization created by the Illinois legislature to represent the interests of residential and small- business utility consumers. For more information on CUB, visit http://www.citizensutilityboard.org/ or call CUB's Consumer Hotline at 1-800-669-5556.

CONTACT: Pat Clark of Citizens Utility Board, +1-312-263-4282

Web site: http://www.citizensutilityboard.org/

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