Retail Unbundling - Illinois

Status: Some residential customers in the state have access to pilot unbundling programs.

Overview: Residential gas customers in 16 Illinois communities have access to choice through Nicor's pilot program "Customer Select." Nicor (formerly Northern Illinois Gas) is the state's largest local distribution company (LDC) with 65 percent of the residential customers. The company began its program in 1997 as a 3-year pilot. The Illinois Commerce Commission (ICC) allowed the pilot to continue for a fourth year on an interim basis while investigating whether sufficient competition has developed. In July 2001, the ICC voted to expand the program to Nicor's entire system, but the action was opposed by the Citizens Utility Board because of concerns that only three suppliers were participating. Nicor reported that 65,833 residential and 64,564 commercial customers (130,397 total) are enrolled in the 2001 choice program which extends through March 2002.

Peoples Gas, another large LDC in the state, started a 2-year pilot program in November 1997 that provided supplier choice to small commercial and industrial customers. The trial period for the program was extended through June 30, 2000, and then approved on a permanent basis. In May 2001, both Peoples Gas and North Shore Gas asked to expand choice to their residential customers.

EIA State Data: In 2000, Illinois had 3,631,762 residential and 292,487 commercial customers with annual natural gas consumption of 467 and 201 billion cubic feet, respectively. The average prices paid for natural gas purchased from local distribution companies by residential and commercial customers were $7.33 and $6.90 per thousand cubic feet, respectively. The average city gate price in the state was $5.01 per thousand cubic feet.

Eligibility/Participation in Retail Choice Programs:

Status as of December 2001: Number of Customers



Customer Type

Total 2000

Eligible

Participating

Total

Percent of 2000 Total

Total

Percent of Eligible

Percent of 2000 Total

Residential 3,631,762 285,000 7.8 65,833 23.1 1.8
Commercial* 292,487 177,000 60.5 64,564 36.5 22.1
Total 3,924,249 462,000 11.8 130,397 28.2 3.3

*All large commercial customers have the option of purchasing natural gas from supplier other than LDCs. The "eligible" and "participating" commercial customers include only small-volume commercial customers.

Sources: Total 2000: Energy Information Administration, Natural Gas Annual 2000 (November 2001). Eligibility and Participation: Estimated by Illinois Commerce Commission and Nicor Energy.

Illinois: Legislative and Regulatory Actions on Retail Unbundling

Summary: Collaborative workshops were held in 1997 to discuss unbundling issues but no consensus was reached. In the fall of 1999, the Illinois Commerce Commission proposed standards of conduct for transactions between utilities and affiliates and relationships with alternative retail gas suppliers. The Commission scheduled a Gas Policy meeting for January 2000 to hear public comments on these proposed rules.

Regulatory and Legislative Actions
Legislation 12/97 Alternative Rate Regulation Conditions. Amendment to Section 9-244(b) of the Public Utilities Act gives the Illinois Commerce Commission authority to allow alternative rate regulation for gas and electric utilities if it would likely result in lower rates and additional benefits than under traditional rate-of-return regulation, allow customers to share jointly with the utility any economic benefits of such a program, not adversely affect reliability and safety standards, not adversely affect the utility's financial condition, and not impede development of competitive markets.
Regulatory Actions 09/01 ICC issued report on utility billing practices as requested by the state legislature (HR 102 of the 92nd General Assembly).
07/01 ICC voted to expand Nicor program systemwide. Nicor says it will offer choice to all its customers by March 2002. Program opposed by consumer advocacy group Citizens Utility Board, which asked for a rehearing. Group considers program not competitive - choice of only 3 suppliers with almost all choosing to buy from Nicor affiliate.
02/01 Nicor Pilot Extended for Fourth Year. PUC allowed Nicor pilot to continue for fourth year on interim basis while investigating program to assess what competition has developed and if program should be expanded (currently pending in Dockets 00-0620 and 00-0621, Consolidated (doing business as Nicor Gas Company).
11/99 Approval of Alternative Rates for Northern Illinois Gas Co. (doing business as Nicor Gas Company). The Commission approved a 2-year "Gas Cost Performance Program" in which recoverable gas costs would be benchmarked to a market-based index. If gas costs are lower or higher than the benchmark, Nicor would share the savings or losses equally with its customers up to $30 million. Additional savings/losses would be apportioned 90% to customers and 10% to Nicor and reflected in rates the following year. The benchmark gas cost would equal the market index cost minus a storage credit adjustment, plus firm deliverability adjustment plus commodity adjustment. The formulae for the market index cost and adjustments are specified in the Commission's ruling.
9/99

Affiliate Transactions, Draft Rule. The Commission posted for comment draft rules to govern transactions between LDCs and their affiliates and relationships with alternative retail gas suppliers. Utilities cannot provide any preferential treatment or customer information to its affiliates, cannot jointly advertise or market services, and cannot tie transportation services with any other goods of its affiliates. All information received from alternative retail gas suppliers (ARGS) is to be considered confidential unless the ARGS specifies otherwise. Utilities and affiliates in competition with ARGSs in the utility's service area must operate independently and cannot share services or facilities, but affiliated interests are permitted to use the logo or corporate name of the gas utility in marketing and advertising. A public hearing on the proposed rules was set for early December and subsequently rescheduled for January 11, 2000.

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File last modified: 06/14/2002