Council view on the deal for PGW

By Darrell L. Clarke

The public relations and lobbying campaign to salvage Mayor Nutter's bid to privatize the Philadelphia Gas Works did not move a steadfast City Council. It did, however, sow confusion and misinformation among citizens.

Here are the facts about the Nutter administration's deal with Connecticut-based UIL Holdings Corp., which was terminated by the energy company yesterday:

Council has no ability to amend a take-it-or-leave-it contract to which it is not a party. The mayor's proposal did not consider Council's many concerns about the impact privatization would have on senior citizens and low-income PGW customers. Council's task was to review the terms of the deal to sell PGW as presented in a binding legal contract we have no power to amend.

Council was not invited to participate in the mayor's exploration of options for PGW. In 2012, an adviser contracted by the mayor identified five strategic options for PGW, including a new management-services agreement, a public-private partnership, an "enhanced status quo," an initial public offering, and a sale.

The Nutter administration unilaterally decided to sell PGW - which, in retrospect, should be viewed as the defining moment that got us to where we are today. Collaboration with Council could have produced a deal for PGW that satisfied the business community, low-income and senior advocates, and consumer watchdogs alike. Instead, the administration's single-mindedness produced a deal that did not reflect the public's many concerns and therefore had no chance of winning Council approval.

The deal did not sufficiently protect the interests of citizens or the city. The mayor's agreement to sell PGW would not have prohibited UIL from selling parts or all of PGW - which would have canceled the terms of the sale agreement. That in itself was reason enough to reject the deal, but there was more. After an initial commitment of three years, UIL would have been free to raise rates to satisfy shareholders; lay off and replace workers (all of whom are Philadelphia residents and many of whom have decades of experience with PGW infrastructure); move PGW headquarters away from Philadelphia; diminish or dismantle energy-efficiency programs for low-income and senior customers; and negatively alter some of the most highly skilled, family-sustaining jobs in the city.

Net proceeds of the deal would have made a dent, but not dramatic progress, in the city's ongoing efforts to fully fund pensions for retired workers. According to Concentric Energy Advisors, an internationally renowned consulting firm, the permanent loss of PGW's annual $18 million payment to the city would have reduced the net benefit of a sale to UIL from $400 million to $600 million to $200 million to $400 million.

The claim that selling PGW is critical to the city's financial health is curious, given that earlier this year the administration also claimed that the pension fund would be just fine despite Gov. Corbett's decision to force city taxpayers to make up for state cuts to funding for Philadelphia schools. Council at the time sought an equitable split of a permanent increase in the city sales tax between the pension fund and schools, but in the end we could not surmount a unified front consisting of Nutter, Corbett, and a GOP-majority General Assembly.

There was no commitment in the sale agreement to accelerate upgrades to PGW's gas pipe infrastructure. Again, Council based its decision on a binding legal contract - not scare tactics in bus-stop ads or handshakes and promises.

Council rejected a bad deal for Philly, and despite UIL's announcement yesterday, we will continue to explore better options for PGW because the status quo is not good enough.

Over two days of public hearings last month, we heard from industry experts, advocates, and citizens on PGW's future. Out of a remarkable diversity of voices, a common theme emerged: Enhancement of PGW's operations must result in a greater number of quality jobs for our citizens.

It's time to work on a blueprint for Philadelphia's future as a regional energy hub. I hope that the mayor and all other stakeholders will join Council's pursuit of a more prosperous PGW that enhances Philadelphia's economic output and benefits businesses and residents alike.