Illinois electricity and heating costs are set to rise – Crain’s Chicago Business

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For example, Peoples in July is charging 63 cents per therm versus 21 cents in July 2020. That’s a continuation of month after month of gas charges multiples higher than last year ever since the sharp freeze in Texas threw energy markets into a week’s worth of chaos. Fortunately, Chicagoans don’t consume much gas in July. But it’s not nothing. The average household is paying an additional $7 this month assuming usage is similar to a year ago. From April through June, the average Chicago household paid $50-plus more just for the commodity in their gas bills based on 2020 usage.

The utility says it will continue to try to spread out the higher costs if they stay where they are or increase from here.

“Due to market forces, the cost of natural gas has roughly doubled since this time last year, and futures show winter market prices trending higher than the summer months,” Peoples Gas spokesman David Schwartz says in an email. “To mitigate the financial impact if this situation persists, we will continue to deploy purchase and planning strategies that serve as a buffer to some of the market volatility and balance any impact by spreading costs across an extended period of time.”

The same story is true for Nicor customers. A spokeswoman notes the utility passes along the costs at no markup. That’s also the case for Peoples and other utilities. They make money on delivering the fuel, not the commodity itself.

At least for households, utilities spread the cost of a market shock like February’s over many months. For many businesses, February bills came due all at once and were bracingly high.

The Peoria Players Theatre, a small troupe whose performances have been shelved during the pandemic, was shocked to open a gas bill from Constellation, the Exelon retail energy unit that serves the group, and see a $5,352.64 charge for February. “A typical monthly gas bill for this time of year would be approximately $750,” according to a formal complaint to the Illinois Commerce Commission by the 102-year-old theater, which says it is the oldest continuously running such group in Illinois.

Responding to a Freedom of Information Act request, the ICC provided a half dozen other informal business complaints about similar shockingly high bills from Constellation, which is one of the largest retail energy suppliers in the country. The names of the businesses complaining in those instances were withheld, but the substance of their complaints was disclosed.

“We were billed $17,000 for gas service in February (normal bill for January is $4,000),” reads one informal complaint taken on April 16 by an ICC staffer. “Is this criminal? Is there anything you can do for us?”

In response, Constellation spokesman Paul Adams says in an email that the company recognizes the February price spike caused an “unforeseen financial burden” for many customers. He couldn’t comment directly on the Peoria theater group but says, “We have committed to offering deferred payment plans and other billing solutions to our commercial and industrial gas customers who have been impacted by abnormally high bills in February.”

Electric bills shouldn’t be affected as quickly. The cost of electricity is set by purchases made in advance. But, eventually, the cost of power will go up if natural gas prices stay high. That’s because gas-fired power plants are on the margin, meaning they’re the last ones needed during peak times of the year to meet demand.

All of this is bad news for utilities and policymakers, who’ve relied on ultralow fuel costs to keep utility bills relatively stable while utilities plowed billions into upgrading their infrastructure. That’s boosted profits for the utilities while—even given the low commodity costs—making it harder for low-income households to afford their bills. Elevated fuel costs will exacerbate that problem significantly.

Meanwhile, natural gas also is consumed in various manufacturing processes. For some—for example, fertilizer producers like Deerfield-based CF Industries—it’s a critical cost component. CF Industries hasn’t yet reported second-quarter earnings, but after the first quarter executives noted that they were having no trouble at the time recovering the marginally higher gas prices through price increases of their own.

Who pays those? Farmers. And then shoppers pay even more at the grocery store—thanks to the cost of a commodity they wouldn’t ordinarily associate with food-production economics.

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July 17, 2021 at 03:43AM

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