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Retail Unbundling - Illinois
Status: More than 70 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 2007, about 234,763 residential customers were participating, up from the 206,776 residential customers participating in December 2006 and the 172,470 in December 2005. All customers of Nicor Gas Company (formerly Northern Illinois Gas), the State's largest local distribution company with about 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 202,063 in January 2008. 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. As of January 1, 2008, the two companies had about 32,700 residential customers enrolled, or about 4 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.

Legislation signed in February 2002 requires that all marketers serving residential customers obtain a certificate of authority from the ICC. As of January 2008, 14 companies had been certified. Eleven companies are listed as serving customers in Nicor's service area, and six companies in Peoples' and North Shore's areas.

A December 2004 study by the State's consumer advocacy group, the Citizens Utility Board, concluded that most Illinois consumers who participated in choice programs paid higher prices in 2003 and 2004 than if they had continued to purchase gas from their local distributor. According to the report, marketers generally offer either a fixed rate for a period of 1 to 3 years, or a variable monthly rate tied to an index. The report also noted that many marketers affiliated with utilities had similar names and logos as the utilities, which could lead consumers to think they are regulated entities. The Citizens Utility Board continues to be critical of the State's choice programs, claiming they are confusing and do not provide enough information to allow consumers to make meaningful comparisons of the various price offerings by marketers. The Board provides a weekly snapshot on its web site of current price offerings and a monthly comparison of how consumers have fared with the various marketing plans since 2003. In September 2007, the Board issued a consumer alert stating that 93 percent of the plans offered by marketers have cost consumers more money than if they had stayed with their utility companies.
EIA State Data: In 2006, Illinois had 3,812,121 residential and 300,606 commercial customers. They consumed 398 and 196 billion cubic feet of natural gas, respectively. The average prices paid for natural gas purchased from local distribution companies by residential and commercial customers were $11.18 and $10.91 per thousand cubic feet, respectively.
Eligibility and Participation in Retail Choice Programs:
Eligibility and Participation by Customer Class, December 31, 2007

Customer Type

2006 Customer Total

Eligible December 2007

Participating December 2007

Total

Percent of Customers

Total

Percent of Eligible

Percent of 2006 Customer Total

Residential

3,812,121

2,773,931

72.8

234,763

8.5

6.2

Commercial*

300,606

242,112

80.5

54,806

22.6

18.2

Total

4,112,727

3,016,043

73.3

289,569

9.6

7.0

     *All large commercial customers have the option of purchasing natural gas from suppliers other than LDCs. The "eligible" and "participating" commercial customers include all Nicor Gas commercial and industrial customers, but only small-volume commercial customers for Peoples Gas and North Shore Gas.
     Sources: 2006 Customer Total: Energy Information Administration, Natural Gas Annual 2006 (October 2007). Eligibility and Participation: Nicor Gas Company, Peoples Gas and Light Company, and North Shore Gas Company (January 2008).

Legislative and Regulatory Actions on Retail Unbundling
Summary: Legislation was enacted in February 2002 that requires the ICC 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 Illinois Commerce Commission proposed standards of conduct for transactions between utilities and affiliates and relationships with alternative retail gas suppliers.
Regulatory and Legislative Actions

Legislation 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 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.
  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.. ICC 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.