CHICAGO — Watchdog groups are calling on regulators to reject $178 million, or 80%, of a $220.8 million rate hike requested by Nicor Gas earlier this year, citing wasteful capital spending, excessive shareholder profits and “lavish” executive bonuses.

Consumer advocate groups including the Citizens Utility Board, the Illinois Public Interest Research Group and the Environmental Defense Fund said the requested hike is about five times higher than it should be.

The bulk of the disputed request is related to Nicor’s request for a 10.35% return on equity, or shareholder profit rate, which advocates deemed “outrageous” and “exorbitant.”

The Illinois Commerce Commission is expected to rule on the case in November. If approved in full, the rate adjustment would increase bills for Nicor’s typical residential customers by a little under $6 a month beginning in 2027.

Experts for Illinois PIRG asked the ICC to reduce the rate to 8.95%, which they said would shave $89 million, or half off the requested amount. Recommendations by other advocates and ICC staff hovered between 9.4-9.5%.

“In just the last nine years, Nicor has raised prices on us five times, more than doubling our delivery charges, and costing customers almost $900 million more per year. In that same time period, Nicor’s corporate parent, Southern Company (Gas), has made nearly $30 billion in profits,” said Eric DeBellis, general counsel for CUB. “We urge the Illinois Commerce Commission to put a stop to this spiraling affordability crisis.”

Those corporate profits come at a time when over 200,000 Nicor residential customers are behind on their bills, with more than $74 million past due, according to state data.

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The watchdogs said Nicor has also cost customers by failing to adequately consider alternatives to traditional pipeline infrastructure and by passing on the cost of executive bonuses.

“Nicor wants us customers to cover about $19 million in executive bonuses they only pay out if the parent company in Georgia hits its profit goals. If not, the money goes to shareholders. Either way, there is absolutely no benefit to customers,” DeBellis said. “The commission has rejected this ‘heads they win, tails we lose’ arrangement before, and we’re asking them to do it again.”

Infrastructure investments

Utilities have often been viewed as a reliable source of income with predictable demand. That lower risk has historically yielded lower investment returns relative to other sectors. Shareholders at utility companies do not make money on the price of energy, but on infrastructure investments needed to deliver that energy.

The advocates allege Nicor overspent on those investments, costing its 2.3 million customers big.

In the past, Nicor raised customer rates approximately once every seven years, spending an average of $284 million per year, adjusted for inflation, between 2000 and 2014, according to the watchdog analyses.

That spending jumped in 2015, after state law directed Nicor and other gas utilities to temporarily invest more to repair high risk pipes, primarily those made of cast iron.

But consumer groups say the excess spending didn’t stop, even after Nicor replaced its last cast iron pipe in 2018, instead averaging $908 million annually for the past six years.

Read more: Nicor files for $221M gas rate hike less than 2 months after last increase approved

Abe Scarr, director of Illinois PIRG, said Nicor’s spending decisions will impact customers for decades, even as Illinois households are using 26% less gas on average than a decade ago.

“These decisions don’t just impact customers now, because utility investments are paid off over time, typically in the range of 40 to 60 years,” Scarr said. “Nicor is preparing a bill today to send to customers in 2076, well past when we should transition to clean energy homes.”

But faced with impending energy shortfalls amid high data center demand and the state’s goal to bring fossil fuels offline by 2045, Nicor described natural gas as an “essential and stable” resource for maintaining reliability of service and lower costs.

“We are working to keep bills as low as possible, while also managing costs to meet evolving regulations that require investment in a resilient energy infrastructure,” a Nicor spokesperson wrote in a statement, adding that the company is in the process of reviewing the filings from the consumer advocates.

Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.