MADIGAN, DEVINE, ENVIRONMENTALISTS, CUB, CITY OF CHICAGO AND UNION AGREE TO CONDITIONS ON PEOPLES/WPS MERGER

Chicago - Attorney General Lisa Madigan today announced that her office, along with the Environmental Law and Policy Center, the Utility Workers Union of America, Local 18007, the City of Chicago, the Cook County State’s Attorney’s Office and the Citizens Utility Board have entered into an agreement with Peoples Energy and WPS Resources Corporation (WPSR) to condition the merger between the two companies on requirements that:  1) ratepayers will receive $6 million in benefits from merger savings in the new company’s operating expenses; 2)  the newly-merged company will, with the Illinois Commerce Commission’s approval, implement  energy efficiency programs for customers; and 3) the newly-merged company will upgrade the utility’s workforce by hiring additional employees to handle meter servicing and safety inspections.

The Illinois Commerce Commission (ICC) is preparing to hold hearings this week on the proposed merger.  In August 2006, WPSR, a Wisconsin utility holding company, applied for approval to acquire Peoples Energy, the parent company of Peoples Gas Light and Coke Company and North Shore Gas Company, arguing that the merger was in the public interest.

Under Illinois law, the ICC must approve the acquisition of any public utility, subject to specific criteria, and has the power to impose conditions on its approval.  The Attorney General’s office, the Cook County State’s Attorney’s Office, the City of Chicago, the Environmental Law and Policy Center, Citizens Utility Board and the Utility Workers Union of America, Local 18007, filed proposals for conditions to be attached to the merger.  The terms of the agreement must be reviewed and approved by the ICC before the conditions go into effect.

“It is critical that service for Peoples and North Shore customers improve,” Madigan said. “It was our goal to make sure that WPS committed to making those improvements before we agreed to support the merger.”  Madigan said her office was particularly concerned by testimony from the union that represents the Peoples Gas workforce stating that current staffing levels and inadequate training and promotion policies pose a threat to public safety

The agreement announced today specifically includes commitments by the utility companies to hire additional employees to handle the day-to-day meter servicing and safety inspections required under state and federal regulations.  Twice last year, the ICC imposed a fine on Peoples for failure to comply with safety regulations.  The fines totaled $1.5 million.

“The Settlement Agreement in this case is a long-overdue step in the right direction.  The Applicants’ commitments reflect their understanding that the Peoples Gas workforce can only provide safe and reliable service to Chicago’s ratepayers if the supply of highly-skilled gas workers is consistently replenished by properly trained and qualified employees,” said Jim Gennett, President of UWUA Local 18007.

In testimony filed with the ICC, the companies’ witnesses stated that the Illinois utilities stood to save millions of dollars annually as a result of the merger.  In response to the companies’ arguments that the merger was in the public interest due to these savings, the consumer advocates sought to make sure that ratepayers would benefit from the projected savings.  The agreement provides that the utility companies will automatically remove $6 million in expenses from Peoples Gas’ and North Shore’s next filing affecting customer rates.  Under the settlement, the companies also agreed to drop rate proposals that would have added about $11.5 million in merger costs to future rate increase requests.

“We have been working to make sure that ratepayers would receive benefits with the WPSR takeover, and that this merger would not simply result in windfall profits for the company’s shareholders,” Madigan added.

"This merger brings Peoples Energy customers new management from WPS resources and opportunities for improved service, a commitment to energy efficiency, and a commitment to the union workers," said Richard A. Devine, Cook County State's Attorney.  "My staff asked for conditions to ensure that ratepayers shared in the benefits of this merger."

"We are especially pleased that this settlement agreement includes a proposal for the implementation of energy efficiency programs," said Corporation Counsel Mara Georges.  "These programs are environmentally responsible, and will result in substantial savings for customers in the future as energy costs continue to rise."  

Within the next few months, Madigan said Peoples is expected to submit a plan to the ICC that calls for a $7.5 million annual energy efficiency program as an additional aspect of the agreement.  Madigan’s office plans to work with the utilities and the Environmental Law and Policy Center to prepare a comprehensive energy efficiency program that will become a regular part of utility operations.  If approved by the ICC, the permanent energy efficiency program will be the first of its kind in Illinois. 

“We applaud the companies' commitment to support and invest in new energy efficiency programs,” said John Moore, senior attorney for the Environmental Law & Policy Center. “They will save Chicago natural gas consumers hundreds of millions of dollars in energy costs, lower the price of natural gas and reduce pollution for everyone. Now is the time for other gas companies to step up to the plate and follow WPS/Peoples’ lead.”

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