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An $8 billion project in Chicago by Milwaukee-based WEC Energy Group Inc. was halted by Illinois regulators as the company predicts hundreds of layoffs at contractors, streets left in disrepair and natural gas meters left dangling on homes and businesses.
WEC Energy-owned Peoples Gas in Chicago filed an emergency motion Friday with the Illinois Commerce Commission seeking a clarification of the order that included pausing the multi-year project. The company is replacing cast-iron and ductile-iron natural gas lines, some of which have been underground as far back as 1859.
The Illinois Commerce Commission on Nov. 16 ordered a pause on the project until the ICC determines the optimal method of replacement and a prudent investment level, according to a WEC Energy (NYSE: WEC) filing with the U.S. Securities and Exchange Commission.
The Illinois commission ordered a new investigation of Peoples' ongoing pipeline replacement efforts and stopped funding while the commission completes its investigation, according to WLS-TV in Chicago.
The Illinois Commerce Commission staff is to initiate a proceeding no later than Feb. 1, 2024, and the proceeding is not to exceed 12 months, according to the WEC Energy SEC filing.
The natural gas line project started under Peoples Gas’ previous owner Integrys Energy Group, which WEC Energy acquired in 2015 for $9 billion. Peoples Gas estimates the project, which is scheduled for completion by 2040, will cost between $8 billion and $11 billion but the company expects the final cost will be closer to $8 billion, a WEC Energy spokesman said.
The so-called safety modernization program is 37% complete and on schedule, the spokesman said.
Peoples Gas hires contractors to execute the pipeline jobs in Chicago. The company’s Friday press release on the emergency motion said Peoples is working to minimize job losses due to the regulatory pause but “several hundred jobs will likely be lost — mostly union construction jobs.”
Peoples Gas said the Illinois commission order paused $265 million worth of work that includes $134 million in “other critical safety and reliability work” beyond replacing aging gas lines. Those projects include emergency replacement of leaking pipe segments, system improvements, public improvement projects and construction projects that can’t be completed this year.
While Peoples Gas awaits a clarification from the regulatory commission, the company said it’s continuing emergency pipe replacements to address leaks.
Peoples Gas requested that the Illinois commission allow the company to finish projects already in progress. The company said such permission would help "avoid having duplicate systems in place, metal plates on streets in disrepair, traffic barrels and barricades in place, and meters left dangling on customer residences and businesses."
Peoples Gas also said completing this work is critical to ensure public safety.
The company said it has 50 projects underway in 13 neighborhoods and another project underway in Chicago's central business district.
The gas line project has long been controversial in Illinois, and the ICC action represents the latest development.
The commission said in a Nov. 16 press release that the order initiates a process to ensure utility companies receive funds necessary to provide safe and reliable service to customers and to maintain and replace aging infrastructure at a reasonable cost to ratepayers.
The commission said that Illinois state law calls for utility companies to recover those costs only if the company demonstrates it is reasonable and prudent.
The commission said its decision initiates a two-step proceeding that includes a detailed action plan for the utilities’ future infrastructure investments. That will involve evaluating the impacts of Illinois’ decarbonization and electrification goals on the natural gas system.
“As the state embarks on a journey toward a 100% clean energy economy, the gas system’s operations will not continue to exist in its current form,” ICC chairman Doug Scott said. “Identifying how our gas and electric systems can adapt to meet these goals, and what specific actions should be taken to achieve them, will be an important task for the commission moving forward.”
The commission also disallowed a portion of rate-increase requests from Peoples Gas and WEC Energy-owned North Shore Gas. The disallowed amounts were $101.1 million and $5.6 million, respectively, the commission said.
The commission said its decision is approximately 25% lower than Peoples’ initial request and 34% lower than North Shore’s initial request.