If you live in Chicago and you pay a gas bill, it will be going up next January – but less than previously anticipated. The same goes for millions of customers throughout the state.

The Illinois Commerce Commission (ICC) on Thursday approved four rate hike requests from the state’s gas utilities worth $575 million.

The original asks totaled more than $800 million, but the commission delivered cuts to each of the proposals from Peoples Gas, North Shore Gas, Nicor Gas and Ameren Illinois.

“It’s safe to say that there is a new sheriff in town,” said Sarah Moskowitz, executive director of the Citizens Utility Board. This was a strong signal from the Illinois Commerce Commission that it’s not going to be business as usual for the gas utilities.

The ICC also blocked funding for the Peoples Gas pipeline replacement program. The controversial project that has cost gas customers billions is now paused. The commission also ordered a new investigation into bringing the utility’s aging network of gas distribution in line with the state’s shift toward clean energy and electrification.

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“The commission sees the writing on the wall and understands that we need to start planning now for this transition,” Moskowitz said. “And that the utilities need to get on board.

Who asked for what and what they got

Peoples Gas requested a $403.98 million rate hike. The ICC approved $302.86 million.

North Shore Gas requested a $16.59 million rate hike and was approved for a $11.02 million increase.

Nicor Gas requested a $320 million rate hike but will receive $233.01 million.

Ameren Gas requested a $71.57 million rate hike and got an approval for $35.23 million.

It still remains unclear what impact the final order will be on individual gas bills. But according to a statement from the ICC, the state’s utility board will “issue an estimated bill impact for the average residential customer once the utilities submit updated compliance filings with the Commission.”

Why utilities request rate hikes

Utilities like Peoples Gas are state-granted monopolies, meaning they don’t operate in a competitive market — yet still generate millions of dollars in profit a year. In exchange for this arrangement, these utilities submit to regulation by the ICC. When Peoples Gas wants to increase the price they charge customers, they first have to make their case before the state regulators.

Utilities can’t ratchet up the actual price of gas. Consumers pay the price of energy at-cost, which can fluctuate depending on global supply. Utilities profit from owning, maintaining and delivering gas through its massive network of pipelines to homes across the state. Peoples Gas wants the hike for the distribution of gas, not the price of it.

To do so, each utility proposes rate hikes to recover the cost of financing the physical infrastructure that makes up their distribution system, including things like gas meters, pipes and gas storage fields. It’s then the job of the state regulators at the ICC to authorize and approve the necessary expenses along with an additional profit rate for utility shareholders. The entire process, from start to finish, lasts nearly a year.

What’s behind the Peoples Gas record-high rate adjustment

This is the first time in nine years Peoples Gas has requested a rate adjustment. Even so, rates have climbed since then. A special surcharge has allowed utilities like Peoples Gas to sidestep the traditional rate case process and recover infrastructure costs through a customer fee. But the controversial fee is set to expire at the end of this year after a decade on the books.

Just this year, that Peoples Gas surcharge averaged just over $16 a month, with a peak of $17.80 this past August, according to Abe Scarr with the Illinois Public Interest Research Group (PIRG).

The big ticket item driving Peoples Gas’s $302.86 million record-high rate hike is a project to replace aging iron pipes across its distribution system. Some of that work dates back to the 1800s, according to Peoples Gas. But modernizing the network of pipes transporting natural gas throughout Chicago isn’t cheap. The project has cost billions and is chronically behind schedule.

On top of the pipe replacement program, Peoples Gas is also trying to recover costs for expenses accumulated over the past nine years, including investments in advanced customer information systems, advanced metering infrastructure and upgrades to gas storage facilities.

How low-income households are impacted

For the first time in Illinois history, the commission assessed the affordability of gas rates — going beyond the typical legal standard applied in rate cases. The discounts approved across all four gas utilities will establish a five-tier, income-based discount that applies to the entire utility bill.

“For the state’s most financially vulnerable customers, who will receive the largest percentage discount, the commission’s decisions are a game changer for the cause of affordable utility bills,” said Karen Lusson, a senior attorney at the National Consumer Law Center. “

To qualify as affordable, the new gas rates may not run over 3% of a household’s monthly income. The commission set a deadline of Oct. 1, 2024 for the four utilities to get discounts in place.

PIRG shows that residents of Chicago’s South and West sides are among the most affected by energy unaffordability.

In Englewood last month, over 40% of all Peoples Gas customers were more than 30 days past due. Nearly 50% of all customers received late fees, and the average debt per customer was $902. In the same time period, 40% of customers in Woodlawn, West Garfield Park, West Englewood, Chatham and South Austin, North Lawndale, and Little Village received late fees.

Juanpablo Ramirez-Franco covers climate change and the environment for WBEZ and Grist. Follow him on X at @__juanpab.