Illinois PIRG has argued for years that the fundamental problem with the SMP is that it does not reduce risk in proportion to the billions of dollars spent. A stricter approach to risk should mean that the program cost less upon reaching greater reduction in security risk.
PIRG sponsored a team of experts for the investigation, which proven fundamental deficiencies in the way Peoples Gas measures risk and prioritizes risk reduction – and set out a rigorous, transparent and probabilistic methodology that Peoples Gas should adopt.
Among other things, a rigorous risk methodology should enable analyses to ensure that Peoples Gas is optimizing its investments. This includes analyses such as cost-benefit analyses (is the benefit of a given investment greater than the cost?) and “risk-spend efficiency” (how much risk is mitigated per dollar spent?). These analyses are critical to ensuring that Peoples Gas does not spend billions of dollars more on a program that is failing.
Peoples Gas is in the midst of a long-overdue transition to a new risk methodology. This is a step in the right direction, but it complicates the investigation because the Commission and the parties to the case do not yet have a full understanding of the new methodology. Peoples Gas claims the new methodology will be operational by the end of 2024, a month before the investigation is due to conclude.
In their refutation TranscriptIllinois PIRG witnesses described three problems with Peoples Gas’ new approach:
- Peoples Gas has stated that it will not conduct a cost-benefit analysis of the proposed risk mitigation investments. As our witnesses explained, “It is untenable that PGL proposes to spend billions of dollars of taxpayer money without considering whether such spending is cost-effective and prudent.”
- The new “JANA” methodology is not transparent – Peoples Gas refused to answer specific questions about its methodology when asked by Illinois PIRG and the City of Chicago. As our witnesses testified: “The lack of transparency means that outsiders cannot reproduce and verify the model results. Instead, the model effectively becomes a 'black box' whose plausibility cannot be independently assessed.”
- In closing, to the extent our witnesses have been able to review the JANA methodology, they are concerned that it is flawed, meaning that Peoples Gas “is likely to waste consumers’ money on ineffective mitigation measures.”
While Illinois PIRG is the only intervening party with risk experts, experts from the City of Chicago and the Attorney General's office have also provided testimony emphasizing that any risk methodology must be transparent. As the Attorney General's witnesses wrote: “The final product should be produced transparently and withstand scrutiny by the Commission and the public.”
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