{"id":17440,"date":"2019-04-04T09:35:35","date_gmt":"2019-04-04T14:35:35","guid":{"rendered":"https:\/\/www.citizensutilityboard.org\/?page_id=17440"},"modified":"2019-04-04T10:37:35","modified_gmt":"2019-04-04T15:37:35","slug":"cub-testimony-slash-nicor-rate-hike-by-82-5-million","status":"publish","type":"page","link":"https:\/\/www.citizensutilityboard.org\/cub-testimony-slash-nicor-rate-hike-by-82-5-million\/","title":{"rendered":"CUB Testimony: Slash Nicor Rate Hike by $82.5 Million"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><p>[vc_row][vc_column width=&#8221;5\/6&#8243;][vc_custom_heading text=&#8221;CUB Testimony: Slash Nicor Rate Hike by $82.5 million&#8221; font_container=&#8221;tag:h2|font_size:24|text_align:left&#8221; use_theme_fonts=&#8221;yes&#8221;][\/vc_column][vc_column width=&#8221;1\/6&#8243;][\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;5\/6&#8243;][vc_column_text]<ul class=\"icon \"><li><i class=\"fa fa-caret-right\"><\/i> <a href=\"https:\/\/www.citizensutilityboard.org\/wp-content\/uploads\/2019\/04\/20190322_NicorRateHike.pdf\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>PDF version<\/strong>\u00a0<strong>of this release<\/strong><\/a><\/li><\/ul>[\/vc_column_text][\/vc_column][vc_column width=&#8221;1\/6&#8243;][\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;5\/6&#8243;][vc_column_text]<strong>FOR IMMEDIATE RELEASE: <\/strong>April 4, 2019<strong><br \/>\nCONTACT:<\/strong> Jim Chilsen (o) 312-263-4282, (c) 312-513-1784<\/p>\n<p>Nicor Gas\u2019 record rate-hike request should be cut by at least $82.5 million, mainly because the company is seeking an excessive profit rate for its shareholders, according to testimony filed by the Citizens Utility Board (CUB).<\/p>\n<p>\u201cNicor\u2019s rate-hike request is bloated and unfair, and our expert testimony proves it,\u201d CUB Executive Director David Kolata said Thursday. \u201cEverybody wants Nicor to have the resources it needs to maintain quality service, but that doesn\u2019t mean the utility deserves an unnecessary rate hike.\u201d<\/p>\n<p>CUB asked Nicor customers to visit its website, at <a href=\"https:\/\/www.citizensutilityboard.org\/\"><strong>CitizensUtilityBoard.org<\/strong><\/a>, to sign a petition to the Illinois Commerce Commission (ICC) against the proposed increase.<\/p>\n<p>In November 2018, just months after the ICC granted the company a $93.5 million increase, Nicor filed for an additional $230 million rate hike.\u00a0 The request, which the ICC will rule on in the fall, is the largest by a gas utility CUB has ever seen in 35 years of consumer advocacy. Nicor is the gas utility for most of northern Illinois, outside Chicago. In 2018, its parent, Southern Company, made $2.2 billion in profits.<\/p>\n<p>CUB and the group Illinois Industrial Energy Consumers commissioned an expert analysis of Nicor\u2019s proposal. The testimony was written by Michael Gorman, of Brubaker &amp; Associates, Inc., a Missouri-based consulting firm that specializes in utility regulation. Gorman uncovered several areas of concern, including:<\/p>\n<p><strong>Return on Equity. <\/strong>Nicor is asking for an excessive \u201cReturn on Equity\u201d (ROE)\u2014or profit rate for shareholders\u2014of 10.6 percent. Gorman instead recommended a more reasonable 9.2 percent ROE, which would reduce the rate hike by $38.1 million. Nicor\u2019s proposed profit rate for shareholders is \u201csimply excessive and results in unjust and unreasonable prices to Nicor\u2019s retail customers,\u201d Gorman wrote.<\/p>\n<p>In the rate-setting process, ROE is the most important component of a utility\u2019s \u201crate of return,\u201d which is the rate at which the utility recovers the cost of financing physical assets, such as gas meters, pipes, and gas-storage fields.<\/p>\n<p><strong>Capital Structure.<\/strong> A utility\u2019s \u201ccapital structure\u201d\u2014basically how it finances infrastructure projects\u2014is another important component of rate of return, and Gorman had concerns there also. He found that Nicor overstated its costs in this area, and he recommended reducing the rate hike by another $12.3 million.<\/p>\n<p><strong>Incentive Compensation. <\/strong>Gorman recommended reducing the amount that Nicor wanted to recover for employee bonuses, cutting the proposed increase by about $12.4 million. &#8220;Shareholders are the primary beneficiary of incentive compensation for financial performance, and therefore it is reasonable to ask them to recover these costs,&#8221; he wrote.<\/p>\n<p>Other accounting recommendations, related to employment, pension and tax issues, amounted to nearly $20 million, leading consumer advocates to recommend reducing the rate hike by a total of at least $82.5 million.<\/p>\n<p>ICC staff and the Illinois Attorney General\u2019s office also are reviewing the case, and CUB hopes to support any additional reductions those parties uncover.<\/p>\n<p>According to CUB\u2019s initial review of the filing, Nicor\u2019s request would increase the residential monthly customer charge by about 29 percent, to more than $20 per month, and increase the per therm delivery charge by about 60 percent. If the rate hike is approved, Nicor has said the average residential customer will pay about $5.36 more per month.<\/p>\n<p>The hike would increase delivery rates, which take up about a third to a half of gas bills. That\u2019s what Nicor charges to cover the costs of delivering gas to customer homes, plus a profit.<\/p>\n<p>CUB warned that all customers\u2014even those with an alternative gas supplier\u2014would pay these higher Nicor delivery charges. So customers should beware of any sales representative who says they can avoid the rate hike by going with an unregulated supplier. All customers would pay these higher rates.<\/p>\n<p>CUB, Illinois\u2019 leading nonprofit utility watchdog, is celebrating its 35<sup>th<\/sup> anniversary in 2019. Created by the Illinois Legislature, CUB opened its doors in 1984 to represent the interests of residential and small-business utility customers. Since then, it has saved consumers more than $20 billion by helping to block rate hikes and secure refunds. For more information, call CUB\u2019s Consumer Hotline, 1-800-669-5556, or visit its award-winning website, <strong><a href=\"https:\/\/www.CitizensUtilityBoard.org\">www.CitizensUtilityBoard.org<\/a><\/strong>.[\/vc_column_text][\/vc_column][vc_column width=&#8221;1\/6&#8243;][\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;5\/6&#8243;][\/vc_column][vc_column width=&#8221;1\/6&#8243;][\/vc_column][\/vc_row]<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column width=&#8221;5\/6&#8243;][vc_custom_heading text=&#8221;CUB Testimony: Slash Nicor Rate Hike by $82.5 million&#8221; font_container=&#8221;tag:h2|font_size:24|text_align:left&#8221; use_theme_fonts=&#8221;yes&#8221;][\/vc_column][vc_column width=&#8221;1\/6&#8243;][\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;5\/6&#8243;][vc_column_text][\/vc_column_text][\/vc_column][vc_column width=&#8221;1\/6&#8243;][\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;5\/6&#8243;][vc_column_text]FOR IMMEDIATE RELEASE: April 4, 2019 CONTACT: Jim Chilsen (o) 312-263-4282, (c) 312-513-1784 Nicor Gas\u2019 record rate-hike request should be cut by at least $82.5 million, mainly because the company is seeking an excessive profit rate for its shareholders, according to testimony filed by the Citizens Utility Board (CUB). \u201cNicor\u2019s rate-hike request is bloated and unfair, and our expert testimony proves it,\u201d CUB Executive Director David Kolata said Thursday. \u201cEverybody wants Nicor to have the resources it needs to maintain quality service, but that doesn\u2019t mean the utility deserves an unnecessary rate hike.\u201d CUB asked Nicor customers to visit its website, at CitizensUtilityBoard.org, to sign a petition to the Illinois Commerce Commission (ICC) against the proposed increase. In November 2018, just months after the ICC granted the company a $93.5 million increase, Nicor filed for an additional $230 million rate hike.\u00a0 The request, which the ICC will rule on in the fall, is the largest by a gas utility CUB has ever seen in 35 years of consumer advocacy. Nicor is the gas utility for most of northern Illinois, outside Chicago. In 2018, its parent, Southern Company, made $2.2 billion in profits. CUB and the group Illinois Industrial Energy Consumers commissioned an expert analysis of Nicor\u2019s proposal. The testimony was written by Michael Gorman, of Brubaker &amp; Associates, Inc., a Missouri-based consulting firm that specializes in utility regulation. Gorman uncovered several areas of concern, including: Return on Equity. Nicor is asking for an excessive \u201cReturn on Equity\u201d (ROE)\u2014or profit rate for shareholders\u2014of 10.6 percent. Gorman instead recommended a more reasonable 9.2 percent ROE, which would reduce the rate hike by $38.1 million. Nicor\u2019s proposed profit rate for shareholders is \u201csimply excessive and results in unjust and unreasonable prices to Nicor\u2019s retail customers,\u201d Gorman wrote. In the rate-setting process, ROE is the most important component of a utility\u2019s \u201crate of return,\u201d which is the rate at which the utility recovers the cost of financing physical assets, such as gas meters, pipes, and gas-storage fields. Capital Structure. A utility\u2019s \u201ccapital structure\u201d\u2014basically how it finances infrastructure projects\u2014is another important component of rate of return, and Gorman had concerns there also. He found that Nicor overstated its costs in this area, and he recommended reducing the rate hike by another $12.3 million. Incentive Compensation. Gorman recommended reducing the amount that Nicor wanted to recover for employee bonuses, cutting the proposed increase by about $12.4 million. &#8220;Shareholders are the primary beneficiary of incentive compensation for financial performance, and therefore it is reasonable to ask them to recover these costs,&#8221; he wrote. Other accounting recommendations, related to employment, pension and tax issues, amounted to nearly $20 million, leading consumer advocates to recommend reducing the rate hike by a total of at least $82.5 million. ICC staff and the Illinois Attorney General\u2019s office also are reviewing the case, and CUB hopes to support any additional reductions those parties uncover. According to CUB\u2019s initial review of the filing, Nicor\u2019s request would increase the residential monthly customer charge by about 29 percent, to [&hellip;]<\/p>\n","protected":false},"author":15,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"inline_featured_image":false,"footnotes":""},"class_list":["post-17440","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/www.citizensutilityboard.org\/wp-json\/wp\/v2\/pages\/17440","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.citizensutilityboard.org\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.citizensutilityboard.org\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.citizensutilityboard.org\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.citizensutilityboard.org\/wp-json\/wp\/v2\/comments?post=17440"}],"version-history":[{"count":0,"href":"https:\/\/www.citizensutilityboard.org\/wp-json\/wp\/v2\/pages\/17440\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.citizensutilityboard.org\/wp-json\/wp\/v2\/media?parent=17440"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}