Studies on PGW sale costing about $100K more

If UIL Holdings Corp. is allowed to buy Philadelphia Gas Works for $1.86 billion, $420 million would go into the city's pension fund.
If UIL Holdings Corp. is allowed to buy Philadelphia Gas Works for $1.86 billion, $420 million would go into the city's pension fund. (MICHAEL BRYANT / Staff Photographer)
Posted: July 16, 2014

City Council's contracts with a consultant examining the proposed sale of the Philadelphia Gas Works will cost nearly $100,000 more than previously announced because of extra work assignments.

The two contracts with Concentric Energy Advisors of Massachusetts will cost $522,750, up from the $425,000 announced March 31, according to documents released by the city in response to an Inquirer right-to-know request.

Concentric, a highly regarded energy consultant, is conducting two studies for Council. One is assessing the Nutter administration's proposed $1.86 billion sale of PGW to UIL Holdings Corp. of New Haven, Conn. A second is examining whether there are better alternatives for the city than selling the 176-year-old utility.

The added assignments have contributed to delays in Council's sale review. Timing is critical because the sale agreement allows UIL to back out of the deal after 11:59 p.m. Tuesday if Council has not made a decision.

Council asked Concentric to expand its study to evaluate PGW's options for extracting greater value from the utility's liquefied-natural-gas facility in Port Richmond. Concentric also was asked to examine whether PGW could leverage its proximity to cheap Marcellus Shale natural gas to promote economic development.

"The final total amount reflects the additional scope of work in connection with both contracts," said Jane Roh, a spokeswoman for Council President Darrell L. Clarke.

Neither assignment was included when Council in December asked prospective consultants to respond to a request for proposals.

Council declined to introduce the sale legislation or hold hearings on the proposed sale before taking its summer recess, and recently bought radio ads to explain its desire to conduct a thorough review of the transactions.

"The reports are taking longer than we anticipated, as Council has broadened the scope, but we continue to hope that the work will be completed very soon, and that Council moves ahead with hearings as soon as they can be scheduled," said Kirk Dorn, a spokesman for the city's PGW sales effort.

UIL is not required to take any action after the passage of the contract deadline, but its spokesman, Michael A. West Jr., last week signaled growing impatience with the protracted review process. Experts say UIL is unlikely to lightly ditch the deal after it has invested $6.9 million in acquisition costs.

In addition to Council's approval, the sale also must be reviewed by the Pennsylvania Public Utility Commission, which is expected to take eight months. UIL has said it expects the sale to close by the end of next March.

Council announced the contracts with Concentric March 31, but the deal was not signed until May 20. Roh said there was "nothing unusual" about the time it took to sign the documents because the contracts required internal legal and financial reviews.

She also said the administration's requirement that Council members and Concentric officials also sign nondisclosure agreements added to the delay.

Council will pay 60 percent of the contract costs, or $313,650. The city's general fund will pay the rest.

"This is a very important and tremendously beneficial transaction for the city, and it's Council's prerogative to invest what it feels is necessary to have its questions answered," Dorn said on behalf of the administration.



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