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Peoples Gas to pay $18.5M to settle investigations into troubled pipe program

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Peoples Gas to pay $18.5M to settle investigations into troubled pipe program

Natural gas utility PeoplesGas Light and Coke Co. and its parent company will pay $18.5million to settle claims that it misled regulators about its .

The Illinois attorney general on May 10 announced twosettlements with Peoples Gas and its parent Integrys Holding, which are now part of An $11 millionsettlement resolves Attorney General Lisa Madigan's investigation into Peoples,and a $7.5 million settlement will resolve a related Illinois CommerceCommission investigation.

Deeply entrenched problems, including sizeable cost overrunsand poor project oversight, emerged in recent years as the accelerated mainreplacement program, or AMRP, came under closer scrutiny when WEC Energy wentthrough the process of buyingIntegrys.

Madigan in November 2015 called for into whether Peoplesbroke state rules in administering the AMRP and whether a complete overhaul ofthe program was needed. The Illinois Commerce Commission in December 2015suspended the AMRP.

Peoples Gas said May 11 that it does not believe that it hascommitted any of the consumer fraud or false claims violations that Madigan hadbeen investigating. However, the company said in an emailed statement it waspleased to have reached the two settlements.

The $11 million settlement, which would need ICC approval,would be split into $10 million for Peoples Gas' customers and $1 million toreconnect low-income ratepayers whose service was recently shut off and tocover outstanding debt for the low-income customers.

Under the $7.5 million settlement involving ICC staff,Madigan, consumer advocate the Citizens Utility Board, WEC Energy, Peoples andIntegrys, the companies would pay $4.5 million to the state and $3 million intoPeoples Gas' program providing heating grants to households that needassistance. The settlement is also subject to ICCapproval.

"This settlement will benefit Peoples' customers whowere misled about the true cost of this expensive project," Madigan saidin a statement. "I will continue to fight to overhaul the program, whichstill threatens the affordability of Peoples' gas service. Peoples Gas'customers already pay some of the highest utility rates in the Midwest, andthey should not bear the burden of an unjustified and overpriced program."

The AMRP, proposed in 2009 and launched in 2011, is a20-year program that aims to retire about 2,000 miles of high-risk pipe,install roughly 3,500 miles of new pipe and move approximately 720,000 meters. PeoplesGas in 2009 estimated the AMRP would cost about $2.63 billion, but the companyin 2012 revised its estimate up to $4.45 billion. In early 2015, the leadproject management company — whichhas since been dismissed — increased the estimated cost of theproject to over $8 billion.

Cholly Smith, the ICC's executive director, welcomed thesettlements as fair and equitable.

"This agreement sends a message to both utilities andconsumers that the ICC will hold utilities to the highest standard oftransparency and integrity to protect consumers," Smith said in astatement.