Evans seeks solution to PGW woes

PHILADELPHIA, November 8th – State Rep. Dwight Evans, D-Phila., today announced he is developing legislation designed to give the state Public Utility Commission (PUC) the legal authority to order the acquisition of the Philadelphia Gas Works (PGW) from the City of Philadelphia by another public utility company.

“It is not a secret that PGW is in trouble and that its ability to keep up with a burgeoning debt, capital improvement needs, and other costs is dwindling,” said Evans. “If PGW should fail financially, there is no plan in place to deal with an emergency situation.

“The City could not handle such a failure,” said Evans, who quoted a recent study of the Pennsylvania Intergovernmental Cooperation Authority (PICA):

PGW’s problems are so deep that it is possible the City will have to make additional financial contributions to the utility or even face a PGW financial collapse that would have ramifications for the entire region.

“PGW can be likened to a consumer with out-of-control credit card debt. Eventually, the weight of the debt overtakes any ability the consumer has to function effectively,” said Evans. “We must consider several factors:

• PGW has borrowed more than $1 billion from bond investors. Interest alone on the debt is more than $50 million a year.
• There are 1,800 miles of aging cast iron pipes that carry PGW gas to its consumers.  PGW cannot generate sufficient cash from operations to properly repair and replace this piping; instead, PGW must take on additional debt that it can ill afford.
• PGW has the highest concentration of low-income customers in Pennsylvania. One-third have incomes at or below 150% of the federal poverty guideline ($30,000 or less income for a family of four). There is a direct link to PGW’s inability to manage uncollectible accounts and a higher burden on the remaining customers.
• PGW operates on a cash flow basis and cannot continue to fund operations by borrowing money.
• PGW has consumer prices that are among the highest in the state.”

Evans said his legislation would give the PUC the power to save PGW. If the PUC determines that PGW could no longer provide adequate, efficient, safe and reasonable service and facilities, and no other alternative exists, the PUC could order a “capable public utility” to acquire PGW. “This action would only be taken as a last resort,” Evans said. “All alternative solutions would need to be ruled out.”

Evans said a PGW failure would have a direct economic impact on the region. PGW customers include more than 25,000 businesses. The workplaces and the employees would be greatly inconvenienced, potential job loss exists and less tourism revenue would hit other segments of the population, said Evans.

“We have a responsibility to prepare for the expected,” said Evans. “Failure of PGW would be a disaster for the entire region. My proposal would give the PUC the authority it would need in an emergency situation to fulfill its mission to protect the public interest.”

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Last Updated: March 21, 2007