Illinois natural gas deregulation allows businesses to choose their gas supplier while their local utility handles delivery. Commercial customers in Illinois can save 20-40% on natural gas costs by switching from default utility rates to competitive supplier pricing. The process is regulated by the Illinois Commerce Commission and involves no service interruption.
For Illinois business owners, natural gas represents a significant operating expense—especially during the state's cold winters. What many don't realize is that Illinois's deregulated natural gas market gives them the power to choose their supplier and potentially save thousands of dollars annually on energy costs.
This comprehensive guide walks you through everything you need to know about Illinois natural gas deregulation: its history, how it works, which businesses can participate, and the step-by-step process for switching suppliers to secure better rates.
Table of Contents
- What Is Natural Gas Deregulation?
- History of Illinois Gas Deregulation
- How Illinois Gas Choice Works
- Illinois Utilities with Supplier Choice
- Who Can Participate?
- Benefits for Illinois Businesses
- Step-by-Step Switching Process
- How to Choose a Supplier
- Understanding Contract Types
- Common Mistakes to Avoid
- Frequently Asked Questions
What Is Natural Gas Deregulation?
Natural gas deregulation refers to the restructuring of the natural gas industry to introduce competition in the supply (commodity) portion of the market while maintaining regulated delivery services. In a deregulated market like Illinois, the natural gas supply chain is divided into two distinct components:
- Supply (Commodity): The actual natural gas molecules you consume. In a deregulated market, you can purchase this from any licensed supplier—not just your utility.
- Delivery (Distribution): The transportation of gas through pipelines to your facility. This remains a regulated monopoly handled by your local utility (Nicor Gas, Peoples Gas, etc.).
Think of it like the telephone industry after deregulation: you can choose your long-distance carrier (supplier), but the local phone lines (delivery infrastructure) are still maintained by the local company. Similarly, you choose who supplies your gas, but your utility still delivers it.
This separation creates competition among suppliers, who must compete on price and service to win your business. The result is typically lower prices and more options for consumers—particularly commercial customers with significant usage.
History of Illinois Gas Deregulation
Illinois has been at the forefront of natural gas deregulation in the Midwest. Understanding this history helps contextualize the mature, competitive market that exists today.
The Path to Deregulation
Prior to deregulation, Illinois utilities operated as vertically integrated monopolies—they produced or purchased gas, transported it, and sold it to customers at rates set by regulators. Customers had no choice in suppliers.
The push for deregulation began at the federal level with the Natural Gas Policy Act of 1978 and accelerated with FERC Order 636 in 1992, which required interstate pipelines to separate their transportation and sales functions. This opened the door for states to introduce retail competition.
Illinois Implements Choice
Illinois began implementing natural gas customer choice programs in the late 1990s:
- 1997-1998: Pilot programs launched for large commercial and industrial customers
- 1999-2000: Programs expanded to include smaller commercial customers
- 2002: Residential customer choice programs introduced
- 2007-Present: Market matured with dozens of active suppliers and millions of participating customers
Today, Illinois has one of the most active and competitive natural gas markets in the country, with over 40 licensed suppliers serving commercial customers across the state.
How Illinois Gas Choice Works
Understanding the mechanics of Illinois's gas choice program is essential for making informed decisions about your energy procurement.
The Role of Your Utility
When you switch to an alternative supplier, your utility's role changes but doesn't disappear. Your utility continues to:
- Deliver natural gas through its pipeline network
- Read your meter and calculate usage
- Respond to gas leaks and emergencies
- Maintain the distribution infrastructure
- Often handle billing (consolidated billing)
What changes is the source of your gas supply. Instead of purchasing gas from your utility at their default rate, you purchase from a competitive supplier at a negotiated rate.
The Role of Your Supplier
Your chosen supplier is responsible for:
- Procuring natural gas on wholesale markets
- Delivering gas to your utility's distribution system
- Setting your supply rate (fixed, variable, or hybrid)
- Managing your supply contract
- Customer service for supply-related questions
Your Bill Structure
After switching suppliers, your bill typically includes:
| Charge Type | Who Sets It | Description |
|---|---|---|
| Supply Charge | Your Supplier | Cost of natural gas commodity (this is what you're shopping for) |
| Delivery Charge | Your Utility | Cost to transport gas to your facility (regulated, same regardless of supplier) |
| Customer Charge | Your Utility | Fixed monthly fee for account maintenance |
| Taxes & Fees | Government | State and local taxes, regulatory fees |
Most Illinois utilities offer consolidated billing, meaning you receive one bill that includes both supply and delivery charges. Some suppliers offer direct billing as an alternative.
Illinois Utilities with Supplier Choice
Four major utilities serve the majority of Illinois natural gas customers, and all offer supplier choice programs:
Nicor Gas
Nicor Gas is the largest natural gas distribution company in Illinois, serving approximately 2.2 million customers across northern Illinois (excluding Chicago proper). Their service territory includes major suburban areas like Naperville, Aurora, Joliet, Elgin, and Rockford.
- Service Territory: Northern Illinois suburbs
- Commercial Customers: ~200,000
- Choice Program: Customer Select
- Website: nicorgas.com
Peoples Gas
Peoples Gas serves the City of Chicago, making it the primary utility for businesses located within Chicago city limits.
- Service Territory: City of Chicago
- Commercial Customers: ~50,000
- Choice Program: Choices for You
- Website: peoplesgasdelivery.com
North Shore Gas
North Shore Gas serves communities along Chicago's north shore, including Evanston, Wilmette, and Highland Park.
- Service Territory: North shore suburbs
- Commercial Customers: ~10,000
- Choice Program: Choices for You
Ameren Illinois
Ameren Illinois serves central and southern Illinois, including Springfield, Decatur, Champaign-Urbana, and Peoria.
- Service Territory: Central and Southern Illinois
- Commercial Customers: ~80,000
- Choice Program: Customer Choice
- Website: ameren.com/illinois
Who Can Participate?
The good news for Illinois businesses is that eligibility for supplier choice is broad:
Commercial Customers
All commercial customers served by the major Illinois utilities can participate in supplier choice programs. There are no minimum usage requirements—whether you're a small retail shop using 500 therms annually or a large manufacturer using 500,000 therms, you can choose your supplier.
Industrial Customers
Large industrial customers have even more options, including the ability to purchase gas directly on wholesale markets and arrange their own transportation (known as "transportation-only" service).
Multi-Site Businesses
Businesses with multiple locations can often aggregate their usage across sites to negotiate better rates. This is particularly valuable for restaurant chains, retail franchises, and property management companies.
Benefits for Illinois Businesses
Illinois businesses that actively manage their natural gas procurement typically experience several key benefits:
1. Significant Cost Savings
The primary benefit is lower natural gas costs. Competitive supplier rates are typically 20-40% below default utility rates. For a business spending $50,000 annually on natural gas, this could mean $10,000-$20,000 in savings.
2. Budget Predictability
Fixed-rate contracts allow you to lock in your supply rate for 12-36 months, protecting your budget from volatile market swings. This is particularly valuable in Illinois, where winter price spikes can significantly impact heating costs.
3. Contract Flexibility
Unlike the one-size-fits-all utility rate, competitive suppliers offer various contract structures:
- Fixed rates for budget certainty
- Variable rates for market participation
- Hybrid structures balancing both
- Index-plus pricing for transparency
4. No Service Disruption
Switching suppliers is purely an administrative change. Your gas service continues uninterrupted, delivered by the same utility through the same pipes.
5. Green Energy Options
Many suppliers offer renewable natural gas (RNG) or carbon offset programs, allowing environmentally conscious businesses to reduce their carbon footprint.
Step-by-Step Switching Process
Switching natural gas suppliers in Illinois is straightforward. Here's the process:
Step 1: Gather Your Information
Before shopping for suppliers, collect:
- Recent gas bills (12 months is ideal)
- Your utility account number
- Service address(es)
- Current contract details (if with a supplier)
Step 2: Analyze Your Usage
Review your bills to understand:
- Annual usage (in therms)
- Seasonal patterns (winter vs. summer)
- Current supply rate
- Contract expiration date (if applicable)
Step 3: Request Competitive Quotes
Contact multiple suppliers—or work with a broker like Commercial Gas Rates—to obtain competitive quotes. Provide your usage data so suppliers can offer accurate pricing.
Step 4: Compare Offers
Evaluate quotes based on:
- Rate (price per therm)
- Contract term (length)
- Early termination provisions
- Supplier reputation and financial stability
Step 5: Sign Your Contract
Once you've selected a supplier, sign the contract. Review all terms carefully, including:
- Start date and term length
- Rate and any adjustments
- Renewal provisions
- Cancellation terms
Step 6: Enrollment Processing
Your new supplier submits an enrollment request to your utility. This is handled electronically and typically takes a few days to process.
Step 7: Service Begins
Your new supply rate takes effect at the start of your next billing cycle, usually within 30-60 days of enrollment. You'll receive confirmation from your utility.
How to Choose a Supplier
With over 40 licensed suppliers in Illinois, choosing the right one requires careful evaluation:
Price
Compare the per-therm rate, but also consider the total cost including any fees. A slightly higher rate with no fees may be better than a low rate with hidden charges.
Contract Terms
Understand the contract length, renewal provisions, and early termination fees. Longer contracts may offer lower rates but reduce flexibility.
Supplier Reputation
Research the supplier's track record. Check for complaints with the Illinois Commerce Commission and read customer reviews.
Financial Stability
Ensure the supplier is financially sound. While your gas service won't be interrupted if a supplier fails (you'd return to utility service), contract disputes can be problematic.
Customer Service
Consider the supplier's customer service reputation. You'll want responsive support if issues arise.
Understanding Contract Types
Illinois suppliers offer several contract structures:
Fixed-Rate Contracts
Your rate stays the same for the entire contract term, regardless of market fluctuations. Best for businesses prioritizing budget certainty.
- Pros: Predictable costs, protection from price spikes
- Cons: May miss savings if market drops, potential early termination fees
Variable-Rate Contracts
Your rate fluctuates monthly based on market indices. Best for businesses comfortable with price volatility.
- Pros: Potential savings in declining markets, flexibility to switch
- Cons: Unpredictable costs, exposure to price spikes
Index-Plus Contracts
Your rate is tied to a published index (like NYMEX) plus a fixed margin. Offers transparency into pricing.
- Pros: Transparent pricing, market-based
- Cons: Still exposed to market volatility
Hybrid/Blended Contracts
Combines fixed and variable components, or includes caps/floors to limit exposure. Balances certainty with market participation.
Common Mistakes to Avoid
Illinois businesses sometimes make these errors when navigating deregulation:
1. Not Shopping at All
Many businesses simply pay the default utility rate without realizing they have options. This often means paying 20-40% more than necessary.
2. Focusing Only on Rate
The lowest rate isn't always the best deal. Consider contract terms, fees, and supplier reliability.
3. Ignoring Contract Renewal
Many contracts auto-renew at potentially unfavorable rates. Mark your calendar to review options before renewal.
4. Not Reading the Fine Print
Understand early termination fees, rate adjustment clauses, and renewal terms before signing.
5. Waiting Too Long
If you wait until your contract expires, you may miss optimal market timing. Start shopping 60-90 days before expiration.
Frequently Asked Questions
What is natural gas deregulation in Illinois?
Natural gas deregulation in Illinois allows commercial and residential customers to choose their natural gas supplier while their local utility continues to deliver the gas. This creates competition among suppliers, typically resulting in lower prices for consumers.
Which Illinois utilities offer supplier choice?
The major Illinois utilities offering natural gas supplier choice include Nicor Gas (northern Illinois suburbs), Peoples Gas (Chicago), North Shore Gas (north shore suburbs), and Ameren Illinois (central and southern Illinois).
How much can Illinois businesses save by switching gas suppliers?
Illinois commercial customers typically save 20-40% on their natural gas supply costs by switching from default utility rates to competitive supplier rates. Actual savings depend on usage volume, current rates, and market conditions.
Is there a fee to switch natural gas suppliers in Illinois?
There is no fee from your utility to switch suppliers. However, if you're currently under contract with a supplier, you may face early termination fees depending on your contract terms. Always review your current agreement before switching.
How long does it take to switch gas suppliers in Illinois?
The supplier switch typically takes effect at the start of your next billing cycle, usually within 30-60 days of enrollment. There is no service interruption during the transition.
Will my gas service be interrupted if I switch suppliers?
No. Your local utility continues to deliver natural gas regardless of which supplier you choose. Switching suppliers is purely an administrative change that affects only the commodity portion of your bill.
Can I switch back to my utility if I'm unhappy with my supplier?
Yes, you can return to your utility's default supply service at any time (subject to any early termination fees in your supplier contract). You can also switch to a different competitive supplier.
How do I know if a supplier is legitimate?
All natural gas suppliers in Illinois must be licensed by the Illinois Commerce Commission (ICC). You can verify a supplier's license status on the ICC website or ask to see their license number.
Conclusion
Illinois's deregulated natural gas market offers significant opportunities for businesses to reduce energy costs. By understanding how the market works, evaluating your options carefully, and choosing the right supplier and contract structure, you can achieve meaningful savings while maintaining reliable service.
Whether you manage the process yourself or work with an experienced energy broker, the key is to take action. Businesses that actively manage their natural gas procurement consistently outperform those that simply accept default utility rates.
Ready to explore your options? Contact us for a free rate analysis and discover how much your Illinois business could save on natural gas.