At Pgw, A Plan To Cut Costs, Services Not Everyone Agrees With The Economy Measures. The Gas Commission Must Approve. Lawsuits Have Been Threatened.

Posted: March 20, 1995

Last year, Philadelphia Gas Works lost $2 million repairing small appliances, such as ranges, dryers and barbecue grills.

The city-owned utility, which expects to barely earn a profit this year, lost another $400,000 selling appliances at prices typically 20 percent above those charged by discount stores.

"One has to ask if PGW should be selling appliances," said E. Talbot

Briddell, the executive who was hired three months ago by Mayor Rendell to fix the troubled utility.

Briddell thinks PGW should not.

Two weeks ago, he presented a "revitalization plan" to top PGW managers and union representatives that amounted to an outline of his firm's efforts to shake up the utility and improve its profitability. PGW is expected to earn about $2 million this year on sales of $500 million.

The plan, which Briddell said was preliminary, challenges some PGW practices that have gone unquestioned for a while. For instance, PGW's appliance stores date back to when natural gas was a novelty and the utility promoted the sale of appliances to create a market for its product.

Briddell's plan also calls for consolidating several district offices,

auctioning off 100 vehicles and closing several leased warehouses.

In an interview, Briddell also broached several politically sensitive issues that could cause a firestorm of controversy.

He said the city should re-evaluate a program that offers forgiveness of unpaid bills to low-income customers. He also said PGW should reconsider the 20 percent discounts it gives to senior citizens, which costs the utility $16 million a year. PGW is the only utility in the country that offers seniors such a reduction.

Although Briddell targeted PGW's small-appliance repair service for cuts, he said he would not reduce the profitable service that repairs furnaces and water heaters for customers who enroll in a prepaid parts-and-labor plan.

The proposals have already irked union representatives and a consumer group, two constituencies that are said to be contemplating filing a legal challenge to the appointment of Briddell's Chadds Ford firm, Phoenix Management Services.

"You're not giving consumers a good deal by charging them slightly less and giving them a lot less," said Lance Haver, a spokesman for the Consumers Education and Protective Association. He said the PGW appliance stores benefit the public because they offer easier credit terms to low-income customers than discount stores do.

Union representatives, upset by proposals that could eliminate their jobs or shift work to outside contractors, said the appliance repair service benefitted the public because it ensured that repairs were done safely by

qualified personnel. PGW charges a small fee for the repairs.

They said Briddell's plan seemed motivated less by the desire to improve PGW's operations than to cut costs, thereby increasing the Phoenix Management's fee, which includes a bonus based upon improvements to cash flow.

"I think his reorganization plan was hastily thrown together to demonstrate he's actually doing something," said Joseph G. Given, president of the Gas Workers Union. He noted that the Philadelphia Gas Commission would need to rule on many of the service reductions.

Others said Briddell's proposals were premature because the public agency that regulates the utility, the Philadelphia Gas Commission, has yet to define formally PGW's mission - whether it should be run as a profit-making enterprise and perhaps privatized or operated as a quasi-business with a social mission.

"You first need broad agreement on PGW's mission statement, and until you do, the plan isn't legitimate," said Steven P. Hershey, a Community Legal Services attorney who serves as the public advocate.

Rotan Lee, the former school board chief whom the mayor appointed in

December to chair PGW's board of directors, endorsed Briddell's strategy and said the complaints were not unexpected.

"Whenever you have rapid and comprehensive change, there is some rancor," said Lee.

The proposal comes at a tumultuous time at PGW, which has operated since 1989 without permanent management. Briddell's firm, which specializes in turning around troubled companies, was hired under a $2.5 million annual contract to fix up PGW until its board of directors hires permanent management.

Almost 400 of 2,400 employees are leaving the utility under an early- retirement plan that is part of Briddell's effort to cut costs. So many were leaving that PGW persuaded more than 100 to stay until next winter so it could gradually redeploy workers to adjust for the reductions.

The early retirees include four vice presidents: Joseph G. Horan, a senior vice president who had been acting chief operating officer; and vice presidents Robert J. Dunnigan, who oversaw administration; A. Jack Egan, who headed support services; and Teresa M. Maloney, the customer activities head.

"Some of the 'old bulls' have left," said Briddell, using a term he said was used within PGW.

The retirees also include 30 of 32 ex-Philadelphia police officers who were hired by former Mayor Frank L. Rizzo when he ran PGW's security force between 1984 and 1986, a post that epitomized the utility's function as a political patronage haven.

The security officers will not be replaced, saving the utility about $2 million a year in salaries and expenses, said Briddell.

Overall, PGW expects to save at least $15 million a year in labor costs

because of reductions in its payroll, PGW officials said in a document filed last week with the Gas Commission. The savings are expected to shrink, however, because the utility's pension costs will increase with the new retirees.

Briddell said that management foresaw no need for general layoffs, although he said "maybe a handful" of employees might be terminated.

His plan was presented last month to PGW's board of directors, called the Philadelphia Facilities Management Board.

Lee, the board chairman, said the seven-member panel expects to appoint permanent managers "shortly after the first of the year." In the meantime, he said, Briddell's role is to devise the "protocols and playbook" that would guide the utility's permanent management.

Lee also said that he believes the board of directors is ultimately in charge: "A stable board with stable leadership should really be seen as the leadership of PGW rather than a turnaround manager."

Since being hired in December, much of the new management's effort has been directed at reducing the amount owed by its customers. The growth of delinquencies has been viewed as one of the utility's critical problems.

Briddell said PGW's much-publicized campaigns to get customers to pay their bills were showing some signs of success.

He said PGW collected $4 million more than it projected in January, even though billings were less than expected because of mild weather.

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