Loop Gains A Customer Bell Atlantic Tower Takes Steam Power

Posted: April 01, 1988

Philadelphia Thermal Energy Corp. has landed the Bell Atlantic Tower building for the Center City steam loop, winning a round in its battle with the Philadelphia Gas Works for new heating customers.

The company said yesterday it had signed a 10-year agreement with Bell Atlantic Properties to supply about 20 million pounds of steam a year to the 53-story office tower, which is being built at 18th and Arch Streets.

Lewis C. Cohen, director of marketing and sales for Philadelphia Thermal, said the signing of the Bell Atlantic Tower marks a turning point for the steam loop, which has been struggling to survive.

Cohen said other major new customers would be joining the steam loop,

helping fuel its revival in the face of a concerted effort by PGW to woo away its customers and to win new customers among the construction in Center City.

Philadelphia Thermal took over the steam loop in January 1987. It was purchased from Philadelphia Electric Co. by Thermal's parent company, Catalyst Energy Development Corp. of New York, for $30 million.

Despite yesterday's announcement, PGW indicated it was not giving up on the new Bell Atlantic building.

"We don't really consider that one a closed deal yet, but I guess they do," said John Legerton, PGW's supervisor of marketing.

Cohen said the 10-year agreement starts in June 1990 when the Bell building is scheduled to be open for tenants. A Bell spokeswoman confirmed that the long-term agreement had been signed.

Legerton said that tenants of the new office tower would save 69 percent a year on their heating bills if Bell Atlantic put a natural-gas-fired furnace in the building instead of hooking up to the steam loop.

"The bottom line to the tenants, the people who end up paying the utility bills, is that the best system is an independent boiler plant using natural gas and fuel oil as an alternative," he said. Such large boilers can switch between natural gas and fuel oil, depending on which is cheapest, he added.

Legerton said PGW is continuing to win its share of new customers, including the new twin tower project being built on Market Street by Blue Cross.

He said the battle for customers in Center City was not just a war between the steam loop and PGW. Philadelphia Electric Co. also is a major factor downtown, he said.

For example, the Liberty Place project developed by Willard G. Rouse 3d is all-electric. The project includes two office towers and a hotel.

As part of its marketing effort, PGW last summer invited steam-loop customers to breakfasts at the Society Hill Sheraton at which it tried to persuade them to switch, arguing that the steam loop was in decline and that their bills would have to go up dramatically as their share of Philadelphia Thermal's fixed costs increased.

However, Cohen said yesterday he was confident that the slide in the fortunes of the steam loop had been stopped.

The loop now has about 450 customers purchasing 4 billion pounds of steam a year. At one time, there were 770 steam customers and the peak load was 8.3 billion pounds of steam.

Cohen said that in addition to the Bell Atlantic agreement, Philadelphia Thermal has oral commitments from about 10 other new customers. Overall, the new customers would increase the steam load by 7 percent.

Bell Atlantic will be among the loop's 40 biggest customers, Cohen said.

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