How utilities’ fossil fuel investments are driving up rates for the most vulnerable

How utilities’ fossil fuel investments are driving up rates for the most vulnerable

A proposed rate hike on gas in Chicago highlights a troubling nationwide trend.

CHICAGO — Donna Carpenter, co-president of the community-led coalition POWER PAC-IL, has lived in Chicago’s Englewood neighborhood for more than 10 years.

She spends much of her time attending rallies and advocating on behalf of low-income families in her community, where she raised six children and three grandchildren.

Since 2017, Carpenter said her natural gas service has been shut off twice by her utility provider, Peoples Gas, because she’s been unable to pay bills. Like her, many residents of Englewood, a predominantly Black and low-income neighborhood, are struggling to keep up with the city’s natural gas bills rising prices. In fact, nearly 49% of residents are behind on bills in the neighborhood, according to data filed by Peoples Gas with the Illinois Commerce Commission.

Yet as rates continue to rise, Carpenter said utilities aren’t looking out for marginalized communities.

“They’re not living in it and they don't see what we go through day to day,” she told Environmental Health News (EHN). “You have to make things affordable for people if you want to keep the service.”

Chicago is not alone: Gas prices have been volatile worldwide in recent years, largely due to stressors placed on the global energy supply chain in the wake of Russia’s invasion of Ukraine. The U.S. Energy Information Administration reported in January that 2022 marked the highest annual average natural gas price since 2008. Last year also marked a 53% increase in natural gas prices from 2021, making it the fourth-largest year-to-year increase on record.

Yet advocates say there’s more to the trend. Utilities like Peoples Gas are devoting more and more funds to over-budget infrastructure projects that will continue their reliance on fossil fuels.

“We do hear from allies across the country that utility rates are an issue,” Courtney Hanson, deputy director of Chicago environmental justice group People for Community Recovery, told EHN. “Communities are really interested in what it would look like to move away from fossil fuel infrastructure and toward a new system where our buildings are electrified.”

What’s behind natural gas rate hikes?

carbon costs justice energy climate

Natural gas utility rates aren’t just rising in Chicago — they’re rising in nearly every U.S. state, due to reasons ranging from shocks in the global energy supply to extreme weather events.

Photo by Markus Spiske on Unsplash

Peoples Gas utility rates have risen for the past decade, and in January the utility filed a proposal with the Illinois Commerce Commission for a $402 million rate increase — the largest in state history, according to Illinois Public Interest Research Group organizer Abe Scarr.

This breaks down to a monthly increase of about $12 per customer, but Peoples Gas spokesperson David Schwartz told EHN customer bills won’t actually rise in 2024 if the rate hike is approved by the state’s Commerce Commission. The majority of the $402 million will replace funds from the Qualifying Infrastructure Plant, a surcharge that is already listed on consumer bills.

Since Illinois passed the Qualifying Infrastructure Plant bill in 2013, Peoples Gas has levied this surcharge to fund its pipe replacement project, which aims to repair and expand the pipes that deliver natural gas to customers across the city.

However, the utility has been overspending on this project, all while making record profits, Scarr told EHN. According to a Citizens Utility Board press release, Peoples Gas initially told legislators the surcharge would amount to $1.13 a month per customer. Ten years later, customers are seeing a surcharge of nearly $15 a month.

These increases mean that the burden of this project has fallen directly onto low-income consumers, said Naomi Davis, CEO of Chicago-based environmental justice group Blacks In Green.

“[Utilities] prioritize their wealth over people's health and safety,” Davis, who has been pushing to cut the rate hike, told EHN. “The lack of light and heat is a public safety crisis, and I think if we learned anything from COVID, it’s that to be able to live safely in your home is a fundamental need of every Chicago family.”

Peoples Gas is an “extreme” example of overspending on infrastructure, Davis said. But natural gas utility rates aren’t just rising in Chicago — they’re rising in nearly every U.S. state, due to reasons ranging from shocks in the global energy supply to extreme weather events.

In states like Florida, where utility rates have skyrocketed over the past 10 years, utilities are pursuing new methane capture infrastructure to bolster their gas systems. Yet even when infrastructure projects look different, the trend is similar — problems with gas systems are overburdening consumers by increasing their rates.

Jessica Azulay, executive director of New-York-State-based group Alliance for a Greener Economy, said New York utilities have asked for rate hikes that are “way over the rate of inflation” in the past few years. These rate hikes are largely driven by utilities looking to fund “very expensive” natural gas pipe replacement and expansion projects, she said.

Many utilities say these upgrades are needed to meet safety requirements or growing customer demand. Yet Azulay and other New York advocates said these rate hikes are “unconscionable” and that utilities are spending more than they need to.

Even in the wake of a watershed 2021 New York state climate law that called for greater electrification, she said utilities aren’t rethinking their plans or lowering infrastructure costs.

“We're starting to see growth slow, but we're not seeing utilities turn the ship around and start strategically thinking about how they're going to move their customers off of gas… and that's been really disappointing,” Azulay said. “The gas system is increasingly expensive.”

What might energy policy solutions look like?

Right now, Chicago-based advocates say their main goal is to drive down rates for low-income families.

“It is very difficult each month for families, because they are forced to make decisions about essential life services,” said Rosazlia Grillier, a POWER-PAC IL advocate and West Englewood resident, at a recent press conference. “They have to sacrifice medicine, food, which bills to pay, and sometimes even rent, as a result of the constantly escalating cost of utilities.”

At the press conference, the Citizens Utility Board called on the Illinois Commerce Commission to slash the Peoples Gas rate hike by $63 million, drawing on expert testimony. The ICC, a government organization that oversees utilities in the state, is set to decide on the Peoples Gas rate hike by the end of 2023.

In the long term, Hanson said it’s also crucial to address the “root cause” of rate hikes: fossil fuel infrastructure expansions.

Similarly to many American cities, Chicago’s 2022 climate action plan aims to cut citywide carbon emissions by 62% by 2040 and calls for electrification to reach this goal. If the city sticks to these targets, utilities like Peoples Gas will start to see their customer base shrink, leaving advocates like Scarr doubting the need for “accelerated spending” on pipelines.

“We're talking about continuing to spend billions and billions of dollars on a gas system as the system could lose 30 to 50% of its customer base… if you cut the customers, it's just going to get impossible for people to afford their bills,” Scarr said.

Uncertain of the future, organizers are focusing on the ICC’s end-of-year decision on Peoples Gas rates. Carpenter said she sees her neighbors and fellow parents as a source of strength in the fight against rate hikes.

“The more parents and the more people in our communities come together, I think we can win this thing,” Carpenter said. “I really do.”

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