Illinois has made major progress towards a clean energy future over the last several years, but its journey to clean, affordable heat is just beginning. The state’s landmark energy bill, the 2021 Clean and Equitable Jobs Act (CEJA), was a major victory for decarbonizing the electric grid, though it did not directly address or create new policies aimed at decarbonizing heating systems. On this front, more work is needed to fully achieve 100% clean across the electric and building sectors. The good news is that key regulators, thought leaders, and decision makers in Illinois have already gotten started on grappling with this complex topic.  

The Illinois Commerce Commission (ICC), Illinois’ chief regulator of natural gas utilities, identified major challenges with business-as-usual gas infrastructure investments that were being proposed by three gas utilities last year. In an effort to dig deeper into this issue, the ICC created several new processes to discuss additional policy changes.  

The policy discussion about the future of clean heat and building decarbonization is also ramping up at the state legislature, where we’re tracking legislation that will support decarbonizing buildings with various programs and policies. 

Underscoring the ongoing efforts to craft new policies is a growing body of evidence that gas utility spending on infrastructure is getting riskier and riskier for consumers. A recent report from the Building Decarbonization Coalition highlighted the most immediate problem of unchecked spending on the gas pipeline system by quantifying the risk – gas delivery charges (the fixed charges on customer bills) could triple in the next decade under the status-quo. Even if regulators make utilities dramatically cut spending today, rates will still rise significantly due to the undertow effect of past capital investments. The report found that Illinois’ largest gas utilities – Nicor, Ameren, Peoples Gas, and North Shore – are at risk of dangerously escalating stranded asset risks to the tune of $80 billion unless gas utilities quickly wind down new investments in infrastructure.  

There is palpable momentum toward decarbonizing Illinois’ buildings sector and protecting ratepayers from ever-increasing energy burdens driven by unchecked fossil fuel spending, but more needs to be achieved on the local level and in the state legislature.  

Here’s a wrap-up of the state’s activities so far, and what’s up next on the horizon for legislative action.  

Regulatory 

Across the board, spending on the gas system is accelerating rapidly and far outpacing growth in gas usage, which is putting significant upward pressure on monthly gas bills.  Back in January 2023, the three largest gas utilities in Illinois proposed rates hikes to pay for pipeline projects and the associated shareholder profit for utilities. To protect customer bills, the ICC issued pivotal orders that cut Nicor’s proposal by 30%, Ameren’s by 51%, North Shore Gas’ by 34%, and reduced Peoples Gas’ rate hike proposal by 25% less than what the utility proposed.  

Notably, the ICC put Peoples Gas’ notorious pipe replacement program on pause. The program, recognized as the Qualified Infrastructure Plan line item on Peoples Gas bills, has been critiqued by consumer advocates in Illinois for its inflation of Chicago gas bills, years-long construction delays, and unclear results. In response to the ICC’s order, Peoples Gas sought to restore $145 million of the $265 million in pipe-replacement expenditures through the rehearing process, but the ICC largely rejected this attempt.  

Under the status-quo, natural gas utilities have no financial incentive to identify lower-cost non-capital-intensive options (such as non-pipeline alternatives like gas demand response, energy efficiency, and electrification with high-performing cold climate heat pumps) to serve their customers. They also have no incentive to plan for declining load due to electrification or efficiency. For that reason, the ICC is taking action to oversee gas utility planning and further established a Future of Gas proceeding and requirements for Peoples Gas/North Shore, Ameren and Nicor to file biennial Long-Term Gas Infrastructure Plans. The Future of Gas proceedings are intended to evaluate the impacts of decarbonization and electrification on Illinois’ gas system through a series of facilitated workshops. More broadly, Future of Gas investigations are critical for understanding the changing building energy environment, and have been used as tools to advance the conversation about building decarbonization in many other states including Massachusetts, Rhode Island, Nevada, Colorado, Minnesota, Oregon, Washington and California. Among other topics, they explore strategies to avoid bill increases that will largely fall upon vulnerable residents, including low-income households, renters, and fixed-income seniors.  

The initial phase of the Illinois Future of Gas workshops identified topics to cover in Phase 2 before concluding in May 2024, followed by a Phase 1 Report draft. United provided comments on the draft, suggesting edits and introducing relevant technologies. Phase 2 of the Future of Gas Proceedings will commence on August 28, 2024, and will address stakeholder positions and consider solutions to the topics identified in the final Phase 1 Report. Participation from stakeholders who can speak to electrification technologies, workforce impacts, and community interests will be key throughout the Phase 2 workshops to give equal weight to perspectives outside of the natural gas industry.  

Moreover, the requirement for Illinois gas utilities to file biennial Long-Term Gas Infrastructure Plans is intended to increase transparency, mitigate costs and help the state comply with climate goals. On July 1, 2024, Peoples and North Shore, Ameren and Nicor each filed work plans outlining development of their long-term plan and opportunities for stakeholder engagement, and we can expect stakeholder engagement opportunities to begin in the third quarter of 2024.  

Legislative 

We’re also seeing movement toward clean heat on the legislative front, but for progress to be realized, we’ll need further action from state legislators. Development of the Clean and Healthy Buildings Act (CHBA) began immediately following the passage of CEJA. The bill, SB 3935, was introduced in May 2024, and includes the following notable elements: 

• Establishes a Heat Decarbonization Standard mandating gas utilities reduce greenhouse gas emissions and reach zero emissions by 2050. 
• Requires a Heat Decarbonization Pathway Study that maps out the most affordable strategies for investor-owned gas utilities to reach the Heat Decarbonization Standard.
• Requires Gas Infrastructure Planning for modernizing and aligning gas system investments and programs with the Heat Decarbonization Standard. 
• Establishes minimum gas energy efficiency standards, focusing primarily on building shell improvements. 
• Creates a State Navigator Program, a “one-stop-shop program” to provide whole home electrification, weatherization, and health and safety upgrades.  
• Requires new construction to be all-electric ready.
• Ends incentives for new gas appliances. 
• Modernizes the gas utilities’ obligation to serve so that a gas utility may cease providing gas service if the ICC determines that adequate substitute service is available at a reasonable cost. 
• Requires low-income gas and electric discount rates. 
• Eliminates gas line extension allowances so that gas main and service extension costs must be borne by customers causing those costs. 
• Requires a study on gas utility financial incentive reform to advance goals of affordability, equity, pollution reduction, system flexibility, electrification, safety, customer experience, cost-effectiveness, and utility financial health. 
• Phases out gas utility fixed charges so that beginning in 2030, any fixed charge cannot be greater than 50% of average monthly fixed charge from 2019-2021. 

We could see movement on the CHBA in 2025 as decisionmakers watch how the ICC’s Future of Gas workshops and the effort for a clean buildings ordinance in Chicago play out. As the legislative process develops, industry will need to play a role in addressing questions from lawmakers related to availability of clean heat technologies, costs, and workforce development.  

Administrative   

The legislative and regulatory momentum we’re seeing in Illinois around building electrification are bolstered by the recent announcement of the Illinois Environmental Protection Agency’s award of over $430 million for Climate Pollution Reduction Grant implementation funded through the Inflation Reduction Act. Illinois’ application includes measures for building electrification and efficiency retrofits, workforce training, and more, with specific callouts for retrofitting 12,000 homes and 2.3 million square feet of commercial space. The state also intends to create clean industry jobs and workforce training opportunities in low-income and historically disadvantaged communities. The grant is a step in the right direction. Relatedly, we are still waiting to see Illinois’ application for the Home Energy Rebates program, which would further lower the cost for efficiency measures and clean appliances.  

United is continuing to take part in both the regulatory and legislative momentum toward clean heat in Illinois. As gas delivery charges continue to burden Illinois residents, the ICC’s action toward a managed transition is necessary and timely. Now it’s time for the state legislature and local governments to act. Together, these measures reduce overspending on an overbuilt gas system and help facilitate a pragmatic, equitable, affordable and reliable transition to clean energy technologies for homes and businesses.