City gas panel OKs plan to hire advisers to sell Phila. Gas Works

Posted: January 18, 2013

A divided Philadelphia Gas Commission on Wednesday approved Mayor Nutter's request to spend $2.7 million of ratepayer money to hire advisers to sell Philadelphia Gas Works.

Over the objections of unionized gas workers and the city's public advocate, the commission voted, 3-2, to hire a team of lawyers, financial advisers, and communications consultants to solicit bids to privatize PGW, the largest municipal gas utility in the nation.

Nutter is pushing to sell the 176-year-old utility, a source of patronage that generates an $18 million annual dividend to the city treasury. The utility's performance has improved dramatically in the last decade, and it is no longer considered an unsellable albatross.

A financial adviser last year estimated that a sale could net the city as much as $496 million after PGW's liabilities of about $1.3 billion were paid off. Potential bidders might include other utilities or private-equity investors.

The gas commission chairwoman, Councilwoman Marian B. Tasco, and City Controller Alan L. Butkovitz voted against the measure to hire sale advisers, saying PGW customers should not have to pay the costs of selling the utility because divestiture will most likely benefit city government.

"The ratepayers in my opinion are likely to lose from a sale," Butkovitz said after the vote. "To ask the ratepayer, who's already going to have higher rates, to pay for the privilege of having his rates jacked up, is adding insult to injury."

Tasco and Butkovitz were outvoted by Councilman Curtis Jones Jr. and two mayoral appointees, Carmen E. Adames, an accountant and tax adviser, and Royal E. Brown, an Independence Blue Cross executive.

Jones said he wanted to explore the potential value of PGW, but he was uncommitted about privatization. He said his vote "should not be misconstrued as a green light to a sale."

About three dozen members of the gas workers union, which opposes a sale because it expects private owners would seek concessions, quietly sat through the meeting shaking their heads.

"I think this decision today is a farce," said James F. Runckel, the union's lawyer.

Robert W. Ballenger, a lawyer for Community Legal Services who serves as the public advocate, said he was disheartened.

"The commission has failed in its responsibility to protect PGW customers from city administration actions imposing upon them substantial costs, which have no relation to the continued operation of the gas works, which provide no benefit to them, and which they should not be required to bear," he said.

Tasco expressed resentment that the mayor imposed the costs on PGW customers, when previous mayors had paid for studies of the utility from taxpayer funds.

The commission's staff, its hands tied by the city solicitor's opinion that the expenses were reasonable, had recommended the commission approve all but a $201,000 payment for public relations consultants and $200,000 for lobbyists to influence City Council, which eventually must vote on any sale.

Suzanne Biemiller, Nutter's first deputy chief of staff, said the adviser fees were legitimate costs.

"Our position all along was that PGW should pay these expenses, it was the right thing to do, and the gas commission agreed with us," she said.


Contact Andrew Maykuth at 215-854-2947, @Maykuth on Twitter or amaykuth@phillynews.com.

 

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