WEC Energy Group to pay $18.5 million in Peoples Gas settlement

Utility allegedly made misleading statements in bid for merger approval

WEC Energy Group headquarters building
WEC Energy Group's Milwaukee corporate headquarters.

Milwaukee-based WEC Energy Group will pay $18.5 million in two settlements with the Illinois attorney general and the Illinois Commerce Commission, the parties agreed Tuesday.

WEC Energy Group headquarters building
WEC Energy Group’s Milwaukee corporate headquarters.

Peoples Gas, which provides natural gas to the Chicago area, is one of the utilities Wisconsin Energy Corp. assimilated in the $9 billion acquisition of Integrys Energy Group that formed Milwaukee-based WEC Energy Group in June.

The ICC was investigating Peoples and Wisconsin Energy, which were accused by Madigan and the Citizens Utility Board of withholding information about the ballooning costs of the Peoples Gas Accelerated Main Replacement Program, which is replacing aging natural gas infrastructure in the City of Chicago, in order to win its approval for the acquisition.

The natural gas main replacement program was initially projected to cost $2.2 billion, but an audit conducted at the ICC’s orders showed the costs had ballooned to about $8 billion. Petitions CUB and Madigan filed with the ICC last year asked the body to investigate WEC, Integrys Holding Inc. and the Peoples Gas Light and Coke Co. for possible violations of the Public Utilities Act. The petition asserted that cost information was misrepresented or withheld from the ICC while it was considering the acquisition of Peoples and its parent, Integrys. WEC claims it did not find out about those costs until after the acquisition was complete.

There were two settlement agreements completed this week, according to a filing with the ICC Tuesday. One totals $11 million and concludes Madigan’s investigation of WEC, Peoples and Integrys. Peoples customers will receive $10 million in bill credits, and another $1 million will go to restoring service and forgiving debt for low-income customers who were recently cut off as utility costs increased.

The second settlement is for $7.5 million, and ends the ICC investigation. WEC, Peoples and Integrys will pay $4.5 million to the state of Illinois for its Public Utility Fund and its General Revenue Fund and $3 million will go to the Peoples “Share the Warmth” fund, which offers heating grants to limited and fixed-income households.

WEC spokesman Brian Manthey said the settlement funds will come from shareholder dollars and cannot be recovered from customers.

Both agreements require approval from the ICC, which is expected to take them up at its regular May 25 meeting, Manthey said.

WEC also sent a statement from Peoples about the settlement, which said, in part: “Peoples Gas does not believe that it has committed any violations of the Illinois consumer fraud or false claims acts that were being investigated by the Illinois Attorney General. Going forward, our focus will be on upgrading Chicago’s natural gas infrastructure in order to ensure Chicagoans receive the safe, reliable and modern distribution system they deserve.”

Madigan said in a release that her office and CUB will keep lobbying the ICC to restructure the AMRP project.

“This settlement will benefit Peoples’ customers who were misled about the true cost of this expensive project,” Madigan said. “I will continue to fight to overhaul the program, which still threatens the affordability of Peoples Gas service. Peoples Gas customers already pay some of the highest utility rates in the Midwest, and they should not bear the burden of an unjustified and overpriced program.”

“I want to acknowledge the hard work and commitment of the ICC staff in resolving these issues, subject to Commission approval, fairly and equitably,” said Cholly Smith, executive director of the Illinois Commerce Commission. “This agreement sends a message to both utilities and consumers that the ICC will hold utilities to the highest standard of transparency and integrity to protect consumers.”

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Molly Dill
Molly Dill, former BizTimes Milwaukee managing editor.