Is City Council dragging its feet on PGW sale?

Posted: June 18, 2014

IS CITY COUNCIL President Darrell Clarke dragging his feet on Mayor Nutter's proposal to sell Philadelphia Gas Works?

Clarke has said Council is simply doing its due diligence and waiting for a report from a consultant it's paying $425,000 to analyze the deal. He has declined to say when the report will be released.

But documents obtained by the Daily News show that the consultant, Concentric Energy Advisors, originally proposed a timeline in which its work would have been completed at least three weeks ago.

The timing is important because Council's last session before its three-month summer vacation is Thursday. UIL Holdings Corp., the company Nutter selected to buy PGW for $1.86 billion, can abandon the deal on July 15 if it isn't approved by then.

The administration is increasingly worried that UIL will walk away if Council doesn't show some sign of life on the issue.

"They have a right to exit the deal on July 15 with no penalty," said Suzanne Biemiller, Nutter's first deputy chief of staff. "If there's no indication coming out of City Council that they will get a full hearing, of course we're concerned."

UIL spokesman Michael West said the company remains "optimistic" and "respectful of the City Council process," but will weigh its options July 15.

"There are several different milestones in the agreement, so obviously they are there for a reason," West said. "We're going to be listening to see what actions may or may not be taken."

If UIL wants to continue pursuing PGW past July 15, CEO Jim Torgerson would have to make the case to his corporate board. The company reportedly has spent about $6.9 million on the endeavor so far.

Clarke has said he isn't concerned with deadlines set by the administration's agreement. His spokeswoman, Jane Roh, said a hearing would be pointless until Concentric finishes its work.

"The Administration is aware that Council and Concentric are still in the process of analyzing over 6,000 documents made available to them," Roh wrote in an email.

Sources said that Concentric, of Marlborough, Mass., will give preliminary briefings to Council members today but is not yet expected to issue its final report.

Philadelphia is the only major U.S. city that still owns a gas utility, and Nutter has made selling PGW a major second-term priority. The utility had a long history of financial mismanagement and political corruption before former Mayor John Street began a widely praised effort to turn it around.

PGW still carries about $1.3 billion in debt. Nutter's proposal would direct the roughly $420 million in profit from the sale to the city's beleaguered pension fund, which has about $5 billion in unfunded liabilities.

Critics of the sale, especially Gas Workers Union Local 686, have said it will hurt PGW workers and endanger protections for poor and elderly customers - claims that the administration denies.

After Nutter indicated that the sale process would move forward, Council late last year began to look for consultants to help it analyze the coming proposal and to examine whether a sale was the best use for the utility.

In January, Concentric submitted proposals for both contracts,which were obtained by the Daily News. It asked for a $225,000 fee to evaluate the administration's selection and a $70,000 fee to explore alternatives to a sale. The company proposed a "six-week project schedule if time permits."

After "feedback from the City Council," Concentric expanded its scope of work on the second contract and upped the price from $70,000 to $200,000, according to a "revised" proposal dated March 18. It made no changes to the proposed schedule.

Nutter announced his agreement with UIL on March 3, and Council announced its selection of Concentric for both contracts March 31. Concentric employees signed confidentiality agreements and had access to the bid information by April 11.

Six weeks after that time would have been May 23, or 3 1/2 weeks ago.

Council has complained that the administration has withheld information and has heavily redacted documents.

In a conference call with shareholders May 8, the first question for UIL CEO Torgerson was about the Concentric report.

"The initial thought was it would probably be roughly a six-to-eight-week process, but that remains to be seen how long that's really going to take," Torgerson said, according to a transcript of the call obtained by the People Paper.

Nutter on April 10 transmitted to Council a bill that would begin the process of authorizing the sale.

The day before, Clarke had sent a memo to Council members that cautioned against introducing the bill on the administration's behalf. He said doing so would trigger a timeline with the state Public Utility Commission's approval process that could tie Council's hands if it wants to modify the sale agreement.

Nutter responded with a letter of his own saying that the PUC cannot approve a sale agreement that is inconsistent with what Council ends up passing.

No Council member has introduced the bill.

A rocky relationship

Clarke and Nutter have had a rocky relationship as the city's two most powerful leaders. Each has been accused of opposing ideas just because they came from the other side.

The Committee of Seventy, a local good-government nonprofit, twice has called on Council to begin the hearing process on the PGW sale as soon as possible.

"If Council intends to kill this deal, or any sale of PGW, it should be up-front and explain its reasons to the taxpayers," Seventy president Zack Stalberg said. "If members genuinely have open minds, they should welcome a public hearing."

Meanwhile, one of the losing bidders is positioning itself to pick up the scraps if the UIL deal falls apart. A new firm called Liberty Energy Trust led by former Enron executive Boris Brevnov has hired lobbyists to talk with Council members about building a pipeline that could connect PGW facilities with natural gas from the Marcellus Shale formation in central Pennsylvania.

Throughout the ordeal, Clarke has maintained neutrality on the merits of the sale, saying that it is probably the largest transaction this Council will decide and that members need time to examine the fine print.

Roh, his spokeswoman, has tweeted: "#PGW in the wrong hands could be disastrous for low-income families," with a link to an Inquirer opinion piece critical of the sale. She also has emailed reporters a Salon.com article titled "6 Things That Should Never Be Privatized" that cites PGW.

Meanwhile, a potentially powerful backer of the sale appears to be on the sidelines. John "Johnny Doc" Dougherty, leader of the influential Electricians Union, has long supported selling PGW but said last week that he has been too busy with other projects to lobby for Nutter's proposal.

"I haven't talked to anybody about it in months," said Dougherty, a frequent Nutter antagonist who has spoken positively about the possibility of Clarke running for mayor next year.

Council sometimes holds fact-finding hearings over the summer to dig into a single issue.

Biemiller, of the Mayor's Office, said she thinks it would be "appropriate" for Council to do so for PGW.

Roh said a decision hasn't been reached about holding summer hearings.


On Twitter: @SeanWalshDN

Blog: ph.ly/PhillyClout

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