Peoples Energy to pay refunds: If ICC approves, utility will settle overbilling suits

The Chicago-based gas utility company agreed to refund $100 million for alleged overbilling between 2000 and 2004 to all current customers of Peoples Gas and North Shore Gas, subsidiaries of Peoples Energy Corp.

The first $50 credit could show up in customers' bills in Chicago and the northern suburbs in March, depending on when and if the Illinois Commerce Commission approves the settlement. The next $50 would come in March 2007.

Total value of deal: $196 million.

Peoples Energy also agreed to spend $30 million over the next six years on conservation programs to help customers save energy. Other consumer credits and benefits bring the settlement's total value to $196 million, according to government officials.

"This is a very fair settlement that provides welcome relief to the people of Chicago," Mayor Daley said in announcing the agreement.

Peoples Energy does not admit to any wrongdoing. The company said in a statement it continues to believe that its gas purchases were consistent with acceptable practices and that its gas prices for the cold winter of 2000-2001 were in line with other utilities in the state.

The settlement resolves civil lawsuits filed by Illinois Attorney General Lisa Madigan and the City of Chicago.

The lawsuits allege that Peoples Energy and some of its affiliates devised a scheme with bankrupt energy giant Enron in some cases that gave Enron authority over when to buy natural gas, how much to buy and at what price.

As a result, Peoples Gas paid higher gas prices than it otherwise should have, and passed those prices on to customers, the lawsuits allege.

The settlement resolves a case pending before the ICC. An administrative law judge for the ICC had recommended a $118 million customer refund, finding that the company failed to show prudence in buying and storing gas.

"This settlement truly is a major victory for consumers who will see credits in their gas bills and justice in this agreement," Madigan said.

Citizens Utility Board Executive Director David Kolata, whose watchdog group had pushed for the refund, said it was the largest for a gas company in Illinois history.

"One of the reasons we signed onto this is it puts all those cases behind us and lets us focus on the future," said Peoples spokesman Rod Sierra.

The attorney general's office said that besides the refund and conservation program, Peoples Energy will forgive $52.3 million of customer debt. The company also agreed to erase outstanding debt of up to 12,000 disconnected customers and reconnect for no additional charge, the state said.

Allen Rosen, chief deputy attorney general, said that the company also will help clear up adverse credit reports in hardship cases.

People's spokesman Sierra said the utility forgives $40 million to $50 million in bad debt every year.

Industry analyst Daniel Fidell of A.G. Edwards & Sons said the settlement helps Peoples Energy shed a "very long and litigious and bad PR issue." Fidell said the settlement may help Peoples in its effort to seek an increase in its delivery charge rate from the ICC.

Peoples Energy is in the final stages of putting together a request for a possible $92 million to $115 million delivery charge increase, to be submitted to the ICC, Sierra said. The delivery charge is separate from the cost of gas.

The settlement of the gas charges does not affect the proposed delivery charge increase.