Inquirer Editorial: Who thinks PGW will lower rates if next winter is colder?

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Among the factors that Philadelphia Gas Works is citing in its request for a $70 million rate increase is the warm winter. That raises an obvious question: If it is extra cold next winter will PGW slash its rates by double digits? Does PGW’s long-range business plan depend on the Farmer’s Almanac?

PGW said warmer winters and more energy efficient appliances and homes had caused its sales volume to drop 11 percent since 2009. It said “changes in the local economy and rising regulatory, health care, and equipment costs” had also made the 11.3 percent rate increase necessary.

Should customers be asked to pay more because they used less energy? Wages have been flat and city residents have been hit with other tax hikes in recent years, including real estate, sales, and the new soda tax. A double-digit rate hike in their gas bills is not in the budget for many residents.

Even more disturbing, PGW wants most of the rate hike to be achieved by raising the fixed monthly charge that all customers pay by 50 percent. For residential customers, that means the fixed monthly cost would go from $12 to $18 a month.

If granted, that would be one of the highest fixed charges by gas utilities in the state. Not to mention that raising fixed charges reduces the incentive for customers to cut back on consumption of gas, electricity, or water.

PGW is not alone in seeking to jack up fixed rates In 2015, Peco Energy Co. asked to raise the fixed charge for residential customers by 68 percent. The Public Utility Commission instead approved an 18.5 percent hike. 

Ray Landis, the AARP’s Pennsylvania advocacy manager, told the PUC last year that raising fixed charges sends the wrong signal to customers. “It reduces their ability to save money by reducing their usage.”

A PGW spokesman said the fixed monthly service charge is based on the actual costs the utility incurs for each customer. But that doesn’t make it any easier to accept a rate hike as high as 50 percent.

This would be PGW’s first base rate increase since 2009. But that does not mean customers have not seen their bills increase. The PUC has approved five surcharges on PGW customers since 2013. The increases paid for infrastructure improvements, energy conservation measures, and post-retirement employee benefits.

While PGW’s management has improved over the years, the city-owned utility remains inefficient with nowhere to grow. Unlike other businesses that have used technology to do more with less, PGW has reduced its 1,650-person workforce by just 36 employees over seven years.

PGW’s employee-to-customer ratio is more than double the national average. Its rates remain among the highest in the country. The bills of about one in four customers are subsidized due to their low incomes. 

To its credit, PGW has reduced its debt and improved customer service. But politics and patronage remain part of its culture.

PGW’s inability to grow and spread its costs were among the reasons why the city would have been better off selling the utility in 2014, when it had an attractive $1.9 billion offer. City Council instead rejected the sale to an investor-owned utility. Now, customers are left footing bills that should not be going up by double digits.