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Report highlights PGW's problems

October 22, 2008

Harold Brubaker, Philadelphia Inquirer



Philadelphia Gas Works is no longer in crisis mode, but decisive action is needed to prevent the city-owned utility from ending up on life support, according to a new report from the Economy League of Greater Philadelphia.


"If this report has highlighted anything, it is that the status quo is no longer an option and that the city's only alternative is to pursue significant reforms of PGW while it still can," the 76-page report issued yesterday concluded.


The report, paid for by the William Penn Foundation and the Pew Charitable Trusts, highlighted underlying problems that threaten the long-term viability of PGW, which has 1,735 employees and serves 505,000 accounts.


The report found that:


PGW has an inefficient governance structure, with more than 30 elected and appointed officials who have their hands on the PGW steering wheel.


The utility's employee-to-customer ratio was more than double the national average. PGW has one employee for every 280 customers. The national average is one for every 644 customers.


The utility is so cash-strapped that it often borrows money to fund regular operations, adding to its long-term debt of $1.23 billion. That debt as a percent of total assets is already triple the national average for gas-only utilities.


Subsidies to low-income customers - who use almost 50 percent more gas on average than full-paying customers - have increased fivefold since 2002 because of higher natural gas prices, wiping out most of the gains from improved bill-collecting operations.


PGW's rates are the highest among those in 20 northern cities.


The utility's finances are in such bad shape that the city would likely have to pay as much as $300 million to have PGW taken off its hands by a private buyer.


"We hope that this report will begin a conversation about PGW, and we look to the mayor's administration for guidance on how to proceed next," PGW spokesman Wade Colclough said.


Mayor Nutter's spokesman, Doug Oliver, said: "Even as the city faces severe financial challenges, we have not forgotten about the stable yet delicate condition of PGW."


He said the Mayor's Office looked forward to reviewing the study and working with the Philadelphia Facilities Management Corp., PGW management, and other stakeholders toward a long-term solution.