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Retail Unbundling - Illinois
Status: Approximately 75 percent of the residential customers in the State have access to unbundling programs.

Overview: Three natural gas utilities in Illinois have customer choice programs that allow their residential customers to buy natural gas from competitive suppliers. As of December 2008, about 277,860 residential customers were participating, up from the 234,763 residential customers participating in December 2007 and the 206,776 in December 2006. All customers of Nicor Gas Company (formerly Northern Illinois Gas), the State's largest local distribution company with more than 50 percent of the residential customers, became eligible for choice in March 2002. Since then, enrollment by the company's residential customers has more than tripled, from 65,833 in March 2002 to 224,805 in February 2009. Customers can change suppliers at any time or resume service with Nicor Gas, although they may be subject to penalties or supplier exit fees, depending on the terms of their contract. To withdraw from the program, customers must notify the supplier. Once they have returned to service with Nicor Gas, they have 45 days to choose another supplier or they will remain with Nicor Gas for 1 year.

The Illinois Commerce Commission (ICC) also approved choice programs for residential and small business customers of Peoples Gas and Light Company and North Shore Gas Company in March 2002. Enrollment limits were set at 13 percent for the first year, 24 percent for the second year, 33 percent in the third year, and no limits after April 30, 2005. In January 2007, Peoples Gas and North Shore became subsidiaries of Integrys Energy Group, Inc. As of January 2009, these two firms had about 53,000 residential customers enrolled, or nearly 6 percent of their residential customer base. Customers may choose to discontinue service under the program, but must choose another supplier within 60 days. Otherwise, customers must stay with the utility for a 12-month period.

The Citizens Utility Board (CUB), the State’s consumer advocacy group, continues to be critical of the State's choice programs. CUB opposes Nicor and People’s Gas and Light Company/North Shore Gas Company’s proposed rate increases of $140 million and $320 million, respectively.  In addition, CUB claims these firms do not provide enough information to allow consumers to make meaningful comparisons of the various price offerings by marketers. In conjunction with the American Association of Retired Persons (AARP) and Citizen Action Illinois, CUB filed a complaint with the ICC against U.S. Energy Savings Corp. in March 2008, claiming this marketer misrepresented itself as a regulated gas utility or the government in addition to other violations of the Illinois alternative gas supplier law.  This complaint urged the ICC to consider revoking the firm’s certification in the State, among other punitive measures.

In January 2009, the Illinois General Assembly passed an amendment to the Alternative Gas Supplier Law (SB 171) requiring marketers to provide clear disclosure of prices, terms, and conditions of all products and services in their sale solicitations.  This legislation also prohibits suppliers from misrepresenting themselves and provides consumers with rights to withdraw from service if they find that the service is not as promised. As of January 2009, the ICC had certified 15 companies as alternative gas suppliers, 14 of which serve residential customers. Twelve suppliers serve customers in Nicor's service area, 10 companies in Peoples' area, and 7 in North Shore's area.
EIA State Data: In 2007, Illinois had 3,845,441 residential and 296,465 commercial customers. They consumed approximately 433 and 203 billion cubic feet of natural gas, respectively. The average prices residential and commercial customers paid for natural gas from local distribution companies were $10.76 and $10.40 per thousand cubic feet, respectively.
Eligibility and Participation in Retail Choice Programs:
Eligibility and Participation by Customer Class, December 31, 2008

Customer Type

2007 Customer Total

Eligible December 2008

Participating December 2008

Total

Percent of Customers

Total

Percent of Eligible

Percent of 2007 Customer Total

Residential

3,845,411

2,889,587

75.1

277,861

9.6

7.2

Commercial/Industrial*

320,465

293,470

91.6

51,910

17.7

16.2

Total

4,165,876

3,183,057

76.0

329,771

10.4

7.9

     *All large commercial and industrial customers have the option of purchasing natural gas from suppliers other than LDCs. The "eligible" and "participating" commercial/industrial customers include all Nicor Gas commercial and industrial customers, but only small-volume commercial customers for Peoples Gas and North Shore Gas. Illinois had 296,465 commercial and 24,000 industrial customers in 2007.
     Sources: 2007 Customer Total: Energy Information Administration, Natural Gas Annual 2007 (January 2009). Eligibility and Participation: Nicor Gas Company, Peoples Gas and Light Company, and North Shore Gas Company (February 2009).

Legislative and Regulatory Actions on Retail Unbundling
Summary: Legislation was enacted in February 2002 that requires the Illinois Commerce Commission to set certification standards for marketers participating in customer choice programs in the State. The ICC has had the authority to allow customer choice programs since the beginning of 1998. In the fall of 1999, the ICC proposed standards of conduct for transactions between utilities and affiliates and relationships with alternative retail gas suppliers.
Regulatory and Legislative Actions

Legislation 01/09 Amendment to Alternative Gas Supplier Law (SB 171) Enacted (approved by General Assembly on 1-13-09). In response to a growing number of constituent complaints regarding misleading marketing strategies by alternative gas suppliers, this amendment requires clear disclosure of prices, terms, and conditions of all products and services in suppliers’ sale solicitations. In addition, the legislation prohibits suppliers from misrepresenting their affiliation with a gas utility, governmental body, or consumer group, and provides consumers the right to cancel 10 days after the gas utility notifies them of a switch and 10 days after the date of the first bill if customers find that the service is not as promised.
  02/02 Alternative Gas Supplier Law (SB 694) Enacted. Governor signed legislation on 2-8-02, which required the ICC to establish certification standards for marketers participating in local and statewide service unbundling programs. Marketers must comply with informational and reporting requirements, be licensed to do business in the State, be bonded ($150,000), and demonstrate creditworthiness. New rules coincide with the start of Nicor's customer-wide voluntary choice program in March 2002.
  12/97 Alternative Rate Regulation Conditions. Amendment to Section 9-244(b) of the Public Utilities Act gives the ICC 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.
Consumer Advocate Actions 03/08 Citizens Utility Board, AARP Illinois, and Citizen Action Illinois File Complaint Against U.S. Energy Savings Corp. The complaint, filed with the Illinois Commerce Commission (ICC) on 3-3-08, alleges that U.S. Energy, a unit of Energy Savings Group, sent employees door to door circulating “bogus petitions” to lower their natural gas bills. In addition, the complaint claims these U.S. Energy employees told gas customers that they worked for regulated utilities or the government. These advocacy groups requested the ICC to ban U.S. Energy’s alleged tactics, eliminate illegally high “exit” fees, fine the company up to $10,000 for each violation of the Illinois alternative gas supplier law, and consider revoking the firm’s certification in the State. U.S. Energy denies the allegations.
Consumer Advocate Report 12/04 Citizens Utility Board Report Critical of Retail Choice. Report claims most consumers who switched suppliers paid on average $172 more in utility costs over the past 2 years than if they had stayed with their utility company. Of the 85 expired plans, consumers in 83 of them lost money, while consumers on 124 of the remaining 130 plans would have lost money to date, although data are incomplete and total savings or losses cannot be determined.
Court Actions 09/07 Court Upholds ICC Order that Peoples Energy Services Corp. (PESCO) Had Mislead Customers. The Illinois Appellate Court for the First District affirmed that PESCO was in violation of the Alternative Gas Supplier Law and had mislead customers in its marketing of natural gas services by inadequately disclosing facts and information.
Regulatory Actions 07/07 ICC Submits Annual Report on the Development of Natural Gas Markets in Illinois. The report outlines the history of natural gas industry restructuring in Illinois and provides data for 2004-2006 on the number of small-volume transportation customers by LDC. In 2006, Nicor had 166,332 residential and 45,814 commercial customers in its choice program, Peoples Gas Light and Coke Company had 28,093 residential and 9,218 commercial customers participating, and North Shore Gas had 3,792 residential and 838 commercial customers enrolled.
  07/04 Peoples Energy Service Fined for Misleading “Fixed Price” Offer. ICC fined marketer $40,000 for violating consumer protection provisions of the Alternative Gas Supplier Law. Its fixed price plan included a clause allowing the company to cancel the contract or raise rates at any time and included a mandatory termination fee for customers who wished to opt out of the program.
  03/02 Small-Volume Transportation Program Approved for Peoples Gas and North Shore Gas. Enrollment open to residential and small businesses who use 50,000 therms or less a year. Enrollment limits were set at 13 percent for the first year, 24 percent for the second year, and 33 percent in the third year. The 12-month minimum stay requirement will not apply until enrollment limits are reached. Suppliers can provide single billing. Customer enrollment via Internet and telephone must be permitted in the utilities’ tariffs.
  01/02 Nicor Choice Approved as Permanent Program. ICC gave final approval to Nicor Choice program for all customers beginning March 2002. Customers can change suppliers at any time, or resume service with Nicor Gas, although they may be subject to penalties or supplier exit fees, depending on the terms of their contract. To withdraw from the program, customers must notify the supplier. Once they have returned to service with Nicor Gas, they have 45 days to choose another supplier or they will remain with Nicor Gas for one year.