Illinois attorney general seeks probe of Peoples Gas project

CHICAGO (AP) — Attorney General Lisa Madigan asked Illinois' utility regulator on Monday to investigate an "out of control" gas pipe replacement project her office estimates could cost Peoples Gas customers in Chicago around $8 billion.

Her office filed petitions Monday with the Illinois Commerce Commission, which could lead to fines. One petition before the commission seeks a review of whether Peoples Gas violated a public utility law by withholding project cost estimates. The other asks for an overall review of the company's long-term Accelerated Main Replacement Program, which is swapping out aging pipes under Chicago streets.

Madigan pointed to an ICC audit earlier this year outlining major issues with management, overspending, effectiveness and safety.

"There is simply no evidence Peoples Gas is trying to reasonably control costs that their customers must pay," Madigan said at a news conference where she called the project "out of control."

All the company's roughly 800,000 Chicago customers have been impacted as the cost for the project is factored into gas delivery bills. The specific cost is unknown, but according to one estimate from Madigan's office, an average residential customer could pay a total of roughly $7,700 toward the project through 2030, when the project is slated to finish.

ICC spokesman Bob Gough said that the company began investigating based on information in the September audit, which is ongoing. He declined to comment on details, but said the commission will continue to "aggressively oversee" reforms and make sure "customers do not bear any costs of program mismanagement."

In a company statement, Peoples Gas officials said they agreed that the project "needed a fresh start," and a new management team and experts to take a deeper look. The results will be provided to ICC by the end of the month, company officials said.

Peoples Gas, which has deemed the project among the most ambitious gas modernization projects nationwide, has previously admitted that its efforts needed improvement. But company officials have also blamed cost increases on city regulations and requirements.

Peoples Gas has already replaced more than 500 miles of distribution pipe since 2011, according to its website. But the audit, conducted by an outside consulting group, also scrutinized the safety and effectiveness of the work, finding that changing out iron pipes with new plastic lines failed to dramatically reduce gas leaks.

Peoples Gas is a subsidiary of Chicago-based Integrys Energy Group, which was recently acquired by Wisconsin Energy Corp.

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This story has been corrected to show that Madigan's office estimates the project could cost an average residential customer about $7,700 over the life of the project, not annually.