CHICAGO — Illinois Attorney General Kwame Raoul’s office and consumer watchdog groups reached a settlement this week with Nicor Gas to cut $140 million, or 63%, from the gas utility’s rate increase request.

The agreement, if approved by regulators, would now add around $2 on average to residential customers’ monthly gas bills — down from the $6 expected under the original $221 million rate request Nicor filed in January. The rate increase proposal drew protests from utility watchdogs, who slammed the company for requesting an “exorbitant” shareholder profit rate.

Read more: Nicor files for $221M gas rate hike less than 2 months after last increase approved | Consumer advocates seek 80% reduction in latest Nicor gas rate request

The original request would have reflected a 14.5% increase over current rates for Nicor’s 2.3 million natural gas customers in northern Illinois. At the time, Nicor said the investments were needed to enhance the reliability of its natural gas distribution system, particularly through extreme weather, and to remain in compliance with state and federal regulations.

Gas utilities deliver natural gas to consumers at market rates and make money on the delivery of the gas, not on the gas itself. Consumer advocates and the AG’s office challenged the spending in Nicor’s request, alleging that significant portions were unnecessary in the short-term.

Under the settlement, Nicor agreed to reduce its shareholder profit rate to 9.48%, down from the 10.35% it sought, and pledged to consider alternatives to traditional pipeline replacement.

The company also agreed to withdraw its appeal of its prior-year rate case, which regulators reduced by nearly 50%.

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“Dismissing the appeal protects Nicor customers from possible future rate increases if Nicor were successful in court,” Raoul’s office said in a statement.

Union jobs, capital spending

Raoul’s office also signed a secondary deal with Nicor to secure organized labor protections. It commits Nicor to maintaining 2026 union staffing levels through the end of 2027 and continuing capital investment levels, as commercially reasonable.

“Our settlement ensures Nicor can continue to retain good jobs in Illinois while protecting consumers from drastic rate increases,” Raoul said in a statement announcing the deal.

Andy Nacke, president of IBEW Local 19, cheered the labor protections in the news release, saying the deal reflected “the importance of labor continuing to have a seat at the table.”

But consumer and environmental advocates that were party to the main agreement were not part of the supplemental labor deal.

For Abe Scarr, director of Illinois Public Interest Research Group, or PIRG, the labor agreement is “bad policy and a misstep” by the attorney general’s office.

“We shouldn’t be basing utility policy based on the number of jobs it’s creating. It’s not a jobs program, it’s a public service,” Scarr said, adding, “We shouldn’t be doing bad projects that are harmful, like overinvesting in fossil fuel infrastructure, just to maintain a job.”

Scarr also said it was a mistake to commit Nicor to high levels of infrastructure spending, when both the AG’s office and consumer advocates have for years accused the utility of wasteful infrastructure spending.

Scarr and Rob Kelter, a senior attorney at the Environmental Law & Policy Center, said the policy could make it easier for the company to argue for a future rate increase to justify inflated spending levels, rather than incentivizing it to look for ways to save.

“When you cement into the deal that they’re going to spend every penny in their budget that they’ve committed to spend on the capital side, that means that you’re not sending the signal to the utility that you need to be prudent,” Kelter told Capitol News Illinois.

Drew Hill, a spokesperson for the AG’s office, told Capitol News Illinois in an email the settlement was about prioritizing spending.

“We believe that more of Nicor’s revenues should be spent on workers’ wages rather than shareholder profits, and the supplemental agreement ensures that,” Hill said.

Compromise for customer control

Advocates did largely cheer a provision in the settlement that lowers the monthly fixed gas delivery charge from $21.30 to $15.00, beginning Nov. 16. That charge is paid by all Nicor customers, regardless of how much natural gas they use.

Customers also separately pay the supply price of gas and a variable delivery charge based on the amount used.

The lower fixed charge will mean that most Nicor customers see lower bills during the summer. It also gives customers more control over their own gas bills, as a greater portion of their bill will now be determined by how much energy is used.

That not only helps customers save on bills, but also incentivizes customers to use less gas, which ELPC attorney Kelter said will be “critical” for Illinois as the state tries to meet its carbon reduction goals.

“This is not a clear win for customers, it’s compromise,” Kelter said. “But I think it keeps moving us in a positive direction.”

The settlement now awaits approval from the Illinois Commerce Commission before it can take effect in November.

Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state Illinois Press Foundation and the Robert R. McCormick Foundation.