Council asks: Is there 'higher' use for PGW?

PGW liquefied-natural-gas plant in Port Richmond. Council wants a consultant to look at the plant's value to the city.
PGW liquefied-natural-gas plant in Port Richmond. Council wants a consultant to look at the plant's value to the city. (CLEM MURRAY / Staff Photographer)
Posted: January 08, 2014

City Council wants to hire a consultant to explore whether there is a "higher and better use" for the Philadelphia Gas Works than privatizing it.

Council last week issued a request for proposals from experts to analyze potential uses for PGW in light of new discoveries of natural gas in the Marcellus Shale formation. The deadline for the proposals is Jan. 29.

The consultant specifically would look at whether the city could get more use out of its liquefied-natural-gas (LNG) plant in Port Richmond, where gas is stored in liquid form for use on peak winter days. PGW has begun using the plant's surplus capacity to produce LNG for private sale.

This is the second consultant that Council is hiring ahead of Mayor Nutter's expected selection of a bidder to buy the city-owned utility. Council issued a call last month for a consultant to evaluate the terms of an expected bid.

Council's quest for independent advice appears to be setting the stage for a contentious sale process, which will require Council approval.

Nutter has proposed selling the once-troubled utility to shore up the city's pension program. The city's financial adviser recently calculated that PGW could command a price ranging from $1.45 billion to $1.9 billion, resulting in net proceeds of $422 million to $872 million.

Some Council members are skeptical about disposing of the utility and say the city might have more to gain by keeping it.

"I don't think the administration thought to look at any other alternatives other than a sale," said Councilwoman Marian B. Tasco, chairwoman of the Philadelphia Gas Commission.

Mark McDonald, Mayor Nutter's spokesman, said the administration welcomed the examination.

"City Council needs to engage in the appropriate level of due diligence of a potential transaction of such consequence," he said.

The brokers who would be selling PGW regard the LNG plant and the utility's riverfront access as one of its most salable qualities. The city's plant might supply LNG by truck or ship to domestic customers that cannot be reached by pipelines.

Council's request said the consultant should examine "opportunities and barriers" to expansion of the LNG facilities.

The report should also examine opportunities for PGW to expand industrial sales of natural gas.

Any sale of PGW would also require approval by the Pennsylvania Public Utility Commission. Some PUC members have pushed for a sale, which they believe would provide PGW with access to more capital and make it more responsive to regulators.

215-854-2947 @Maykuth

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