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The Must-Answer PGW Sale Questions

Steve Wray
Philadelphia Daily News

 

The Economy League of Greater Philadelphia, like most others in the civic community, is disappointed in city council's recent decision to not hold public hearings on the potential sale of the Philadelphia Gas Works (PGW) to UIL.

 

Two independent Economy League analyses conducted in 1995 and 2008 highlighted the challenges with public ownership and control of such a crucial asset and called for serious reforms in how it was governed and operated.

Since that time, PGW's management has worked hard to turn around the financial fortunes of the utility. The fact that a private bidder stepped forward reflects both their hard work and the attractiveness of the region as a potential energy hub.

 

While city council made a serious error in refusing to thoroughly consider UIL's offer, all is not lost. Council's recent decision to hold public hearings about Philadelphia's energy future this week presents a great opportunity to have the discussion that is needed to move forward. But, to do that, these hearings must explicitly address the findings of the $522,000 Concentric consulting report that the Council commissioned to analyze the potential sale of PGW to UIL.

 

Based on Concentric's report, UIL's offer and past Economy League analysis of PGW and its role in the city, we believe the following questions must be addressed during these hearings:

 

If PGW has sufficient value to be attractive to a private owner, why should the city retain ownership of this asset? Multiple analyses have shown that the level of government oversight that PGW is subject to has hampered its ability to effectively compete in a fluid and ever-changing energy marketplace. Recognizing these challenges, our peer cities have moved to private provision of gas. PGW is now - by far -the largest municipally owned gas utility in the country.

 

If Council refuses to consider the UIL offer, what other funding alternatives could provide an infusion of dollars to the City's underfunded pension plan? UIL's offer would have immediately injected over $400 million into the fund, reducing risk for retirees and long-term costs.

 

Which path (private versus public ownership) would put PGW in the best position to accelerate the replacement and modernization of its aging gas mains? Many of PGW's mains are made of outdated cast iron and need to be replaced with industry-standard plastic pipes. UIL's access to the private bond market could allow for long-term financing of these critical upgrades, as well as accelerate the replacement schedule - which would support high-paying construction jobs in the near term. Given that PGW, as a stand-alone entity, does not have access to the same tools that a private owner would possess, an alternative plan for accelerating this schedule must be discussed if PGW is to remain publicly owned.

 

Which form of ownership would best support the region's ability to realize its potential as a nationally recognized energy hub? Many in the business community are focused on this goal, and it was prominently featured in the Concentric report.

 

Without an open and thorough hearing that includes testimony on the pros and cons of both the UIL offer and continued city ownership of PGW, city residents cannot effectively evaluate the future path for PGW.

We call on city council to do the right thing: Ensure that this week's hearings include discussion of the UIL offer and any plans that council might have for continued public ownership; then cast up or down votes on consideration of the UIL offer. The citizens of the city deserve that debate and that vote.

 

Steve Wray is executive director of the Economy League of Greater Philadelphia.