Inquirer Editorial: From albatross to golden goose

Pipes carrying gas at the PGW plant in Port Richmond.
Pipes carrying gas at the PGW plant in Port Richmond. (CLEM MURRAY / Staff)
Posted: March 10, 2014

What a surprisingly plump golden goose the city-owned gas utility has become. Mayor Nutter is holding an offer for the Philadelphia Gas Works that would net the city at least $426 million to patch its ailing pension fund.

That's the same Philadelphia Gas Works that was a bloated patronage haven before then-Mayor John F. Street brought in new managers in 2000. PGW once offered special handling for the influential while subjecting average customers with legitimate gripes to endless delays. So lax were bill collections, and so great the need for repairs to the utility's 3,000 miles of aging gas mains, that PGW's debt ballooned. Several years ago, analysts suggested that the city would have to pay someone to take PGW off its hands.

So, yes, that should have been one pleased mayor who announced last week that the city could sell PGW for $1.86 billion to the Connecticut-based energy company UIL Holdings Corp. At that price, the city could pay off the utility's debt and use the remaining millions to trim both its unfunded pension liability and its annual payments into the retirement fund.

As for the utility's customers, particularly the many low-income residential gas users already having trouble paying their bills, there is less reason to celebrate the potential sale. They can hope that UIL delivers on its pledge to dramatically increase the pace at which aging mains are replaced - protecting neighborhoods and utility workers alike - as well as its promises to hold base rates steady for three years while maintaining assistance for low-income customers.

But the main replacements inevitably would drive requests for rate increases that the state Public Utility Commission would be hard-pressed to refuse. And the proposed deal appears to offer openings for the company to boost rates and alter aid programs.

Those and other concerns should be front and center as City Council takes a close look at the proposed sale in the next stage of the process. The terms of Nutter's agreement foresee Council approval by July 15, but Council President Darrell L. Clarke has adopted the right approach in saying the review will proceed at a deliberate pace. The utility commission is expected to take the rest of the year for its review, and it's critical that Council fully vet this deal, too.

One means of determining whether this or any sale makes sense is to look far more carefully at the largely unexplored alternative of improving PGW under continued city ownership. After all, the utility's management is highly regarded, its workforce is smaller than at any time in recent memory, and PGW could pursue the same growth opportunities - wider sales of liquefied natural gas, for instance - that a private firm could.

Without question, Nutter has presented a promising proposal to Council and state regulators. But it's precisely because PGW has done so much to achieve what might be called ain't-broke status that before a sale is approved, it must be judged to be far and away in the best interests of all the utility's customers and the city as a whole.

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