PGL Peoples Energy Corp

Peoples Energy (NYSE:PGL) said today it is disappointed in the ruling by the Illinois Commerce Commission denying its creative solution for a Weather Normalization Adjustment (WNA) that would have helped to stabilize the service charge portion of customers' bills during colder and warmer than normal winters. The companies filed a short notice petition in April, asking the Commission to approve the WNA so that it could be implemented for the upcoming winter. In denying the petition, the ICC cited concerns about "single issue" ratemaking and suggested the petition is best considered in the context of a more extensive rate proceeding. Importantly, the Commission was supportive of the concept and the benefits it provides customers. "We are discouraged by the Commission's action," said Kathy Donofrio, senior vice president, Peoples Energy. "Weather normalization tariffs are in place at 37 utilities in 19 states and are a progressive way to mitigate the impact of weather on customer bills and company earnings and cash flow. Since the rate making process assumes normal weather, we do not believe a full rate proceeding is needed to approve this 'revenue-neutral' mechanism." The biggest benefit to customers of WNAs - which have been in effect since the 1980s in other states - is price stabilization of the service charge portion of their bills. Customers have repeatedly told the company that price stabilization is very important to them to allow for proper budgeting and management of their energy needs. While Peoples Energy utilities attempt to mitigate price volatility of the gas charge portion of the bill through their hedging programs, a WNA would provide a "hedge" for the non-gas charge portion of customers' bills. This would help to offset the compounding effect on customers when cold weather is accompanied by high commodity prices. The company has conducted meetings, responded to data requests and hosted workshops to educate, communicate and facilitate the approval of the proposed WNA. However, the Commission and Intervenors suggest a rate case proceeding would be a better venue for reviewing the benefits of the WNA. Peoples Energy considers this viewpoint shortsighted but will now consider the recommendation to pursue strategies to provide customers stability and improved safe and reliable service through a general rate proceeding. Peoples' utilities have not increased their rates for delivering gas service to customers in more than 10 years despite increased costs of doing business. In the meantime, the company has made substantial investments in its delivery system and improvements to customer service. The company said its utilities have under-earned their allowed returns for the past two years and have taken many actions to prevent having to file for rate relief. "Few utilities around the country can match the Company's record of avoiding filing for rate relief for 10 years," said Donofrio. "This is a testament to our employees' ability to improve efficiency in our utility operations, most recently demonstrated by our successful organizational restructuring in fiscal 2004." Peoples Energy, a member of the S&P 500, is a diversified energy company comprised of five primary business segments: Gas Distribution, Oil and Gas Production, Power Generation, Midstream Services, and Retail Energy Services. The Gas Distribution business serves about 1 million utility customers in Chicago and northeastern Illinois. Visit the Peoples Energy web site at PeoplesEnergy.com.