But achieving such savings is not assured. A 2007 study of utility mergers and acquisitions by the Boston Consulting Group found that fewer than half of the mergers failed to achieve projected cost savings. Some ended up even adding costs.
And a private owner would have to overcome some inherent advantages enjoyed by the nonprofit municipal utility, which pays no income taxes on earnings and does not have to produce a return on equity, other than an $18 million annual franchise fee it pays the city.
"All things being equal, a municipal utility has certain cost advantages," said Irwin A. "Sonny" Popowsky, Pennsylvania's consumer advocate, whose office would analyze any proposed sale or merger for its effect on consumers.
A sale would also have to overcome likely political inertia from officials reluctant to part with a business the city has owned for 176 years and that serves 500,000 customers, including 150,000 low-income residents.
A 2008 study by the Economy League of Greater Philadelphia valued PGW at $1.3 billion to $1.5 billion, less than its long-term debt and employee retirement obligations. That study said the city would "likely have to pay another entity to take PGW off its hands."
George W. Bilicic, Lazard's vice chairman of investment banking, said PGW's value had increased in the last five years because the managers had improved collections, operations, and financial stability.
"It's clear that the management team has really fixed this company," he said, referring to former chief executive officer Thomas Knudsen and current CEO Craig White.
