Study Shows How Utility's Deals With Enron Harmed Consumers CHICAGO, Jan. 10 /PRNewswire/ -- Peoples Gas overcharged customers at least $149 million as the result of a secret, illegal profit sharing deal with an affiliate of Enron that resulted in consumers paying excessive rates during the winter of 2000 - 2001, when gas prices reached record highs, according to a study commissioned by the Citizens Utility Board (CUB) and the City of Chicago. The study has been filed as formal testimony with the Illinois Commerce Commission (ICC), which is investigating the Chicago-based company's gas purchases from that winter. CUB and the City are asking the ICC to order a refund, averaging $163 per customer, of all overcharges documented by the study and by previous testimony filed by the groups in 2003. Based on documents obtained from the company, the testimony shows how Peoples Gas gave up control over its gas purchases and storage to Enron and its affiliates. Those companies then funneled profits from trading the gas -- originally intended for consumers' use -- to Enron and Peoples Energy, the gas utility's parent company. As a result of the deals, during the winter of 2000 - 2001, when natural gas prices reached nearly $1 per therm, People Gas had to purchase replacement gas to sell to consumers at record-high market prices. The City and CUB's testimony, prepared by the accounting firm of Grant Thornton LLP, identified three new areas in which consumers were overcharged because of the shady relationships between Peoples Gas and Enron, overcharges totaling $98 million. Previous testimony by CUB identified at least $51 million in overcharges stemming from the Enron deals, for a total of $149 million in refunds due consumers. "Our experts have been poring over company documents for the last year and they have pieced together a tangled web of secret, improper deals designed to inflate the profits of Peoples Energy at the expense of consumers," CUB Executive Director Martin R. Cohen said. "At a time when gas costs were skyrocketing and the company said it was doing all it could to reduce prices, Peoples Gas was swindling its own customers -- and they almost got away with it." The CUB/City testimony documents how the deals between Peoples Gas and the Enron affiliates formed the basis for a controversial five-year contract Peoples entered into to purchase roughly two thirds of its natural gas from Enron -- a contract CUB and the City's experts conclude was imprudent. The contract was so heavily weighted in favor of Enron, that without the secret profit sharing arrangements between Peoples Energy and Enron, Peoples Gas would have had no incentive to adopt it. Grant Thornton's analysis finds that under the contract itself, in 2001, customers paid at least $36 million more than they should have for natural gas. The study also identified a huge, as yet unexplained, increase on Peoples Gas' books in "lost or unaccounted for gas," the difference between the amount of gas purchased by the company and the amount ultimately available for sale to customers. Gas companies typically "lose" between 0 and 3 percent of total gas purchases and in fiscal years 1999 and 2000, Peoples Gas reported a 3 percent loss. In 2001, however, that loss jumped to 8 percent, enough gas to heat the equivalent of 71,299 homes for an entire year. Although company documents show Peoples Gas was aware of the problem, the company has given no explanation for the increase and took no actions to correct it. Evidence suggests that the "lost" gas actually was diverted to the Enron trading deals, at consumers' expense. Customers paid $41 million more than they should have because of these arrangements. The CUB/City testimony also recommends that $20 million in profits generated by the trading deals, and split between Enron and Peoples Energy, should be credited to ratepayers because the profits were generated at the expense of consumers. The company has refused to turn over key documents needed to quantify other overcharges in 2001, the year under investigation. Once CUB and the City obtain those documents, the refund recommendation is likely to increase. And, many of the study's conclusions will apply to other years, so additional refunds will be warranted in the future. SOURCE Citizens Utility Board CONTACT: Pat Clark of Citizens Utility Board, +1-312-263-4282 -0- Jan/10/2005 20:17 GMT
CUB, City of Chicago Seek $149 Million Refund From Peoples Gas,
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