Peoples Gas had asked the state for a $402 million increase. Thursday, the ICC reduced it by 25% to $300 million.
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Consumer advocates want to see the proposed hike slashed below $290 million, which would still top the state's previous all-time high increase of $240 million approved for Nicor in 2021.
A $402 million increase would raise the average monthly residential bill by about $11.83 starting next year, a cost Peoples Gas says it expects to be offset by falling natural gas prices.
Illinois Attorney General Kwame Raoul's office has recommended regulators reduce the proposed hike by $49.2 million, asking the commission to "scale back Peoples Gas' overspending" and asserting it's "not in line with the state's energy policies."
Leaders at the utility have noted it's their first requested hike in nine years, saying it "is meant to ensure ongoing safety, reliability and environmental sustainability in Chicago."
The commission also ordered a new investigation of Peoples' ongoing pipeline replacement efforts, and paused funding for it until the investigation was complete.
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Peoples Gas said it will "fully review the final order to determine its impact."
Consumer advocacy groups cheered the decisions.
Rate hike requests for North Shore Gas and downstate's Ameren were also slashed.
The Sun-Times Media Wire contributed to this report.