Description
Nicor Gas Company (Nicor) filed a petition to the Illinois Commerce Commission (ICC) to request an increase in base rate revenues by $292 million or 32.71 percent. The future test year revenue requirement filed by Nicor included $1.71 billion in capital investments added to rate base since its previous base rate filing two years prior. The Illinois Attorney General's Office (IL-AGO) intervened in the proceeding on behalf of Nicor's residential consumers and wanted to hire a firm to review the prudency and reasonableness of the proposed capital additions.
Service Provided
DHInfrastructure's staff submitted direct and rebuttal testimony that focused on our reviewed $809.2 million in capital projects that were completed outside of Nicor's Qualifying Infrastructure Plant capital tracker program. As part of our review, we found that many of these projects had substantial - greater than 20 percent - cost overruns and that Nicor's explanation for the excess costs lacked substance and did not provide sufficient support for cost recovery. As we reviewed the cost variance explanations, we identified five reoccurring issues across 45 projects with insufficient evidence to support cost overruns. Among the issues we identified were redundant variance explanations and poor project due diligence. We also found that projects completed by Nicor's alliance partner - a third-party with a long-term construction agreement -were more likely to have cost overruns than projects procured using any other approach. We recommended that the ICC disallow the recovery of the project cost overruns for these 45 projects due to a lack of support that the excess costs were prudent.