Selling PGW: A bad deal

Not all utilities are the same. Compare, for example, Philadelphia Gas Works with Connecticut-based UIL Holdings, which is seeking to buy PGW and privatize it for profit. Both sell gas to their customers. But other than that, the differences are stark and plentiful.

The city-owned PGW does far more than simply provide gas to 500,000 Philadelphia customers. As a not-for-profit, PGW has no obligation to make money for shareholders and executives. Instead, it can - and does - act primarily for the benefit of all Philadelphians.

PGW offers a range of services and assistance to its customers and city residents, including grants, efficiency rebates, and assistance for residents who have trouble paying their bills. In fact, PGW goes above and beyond state requirements for assisting low-income households, offering discounts to seniors and emphasizing repayment arrangements to avoid service disconnections.

Also, rather than seeking to sell as much gas as possible, PGW promotes conservation, which helps customers save money and preserves an important natural resource for future generations. Conservation lowers the level of greenhouse gases and toxics created by burning fossil fuels, thus improving air quality and our environment.

City ownership of PGW allows public participation in decisions about Philadelphia's gas infrastructure and the city's future. In 2006, for example, public pressure on City Council thwarted a proposal to build a Liquefied Natural Gas (LNG) terminal on the Delaware River. The facility would have concentrated highly combustible fuel in a densely populated area, posing a serious public safety hazard. Less than a decade later, with the hydraulic fracturing boom across Pennsylvania, the possibility of a Philadelphia LNG export terminal looms once again. The PGW sale would silence a critical voice in this debate.

From UIL's website, you might think it had no customers to serve, and only one objective: making money. The company touts its "long-term investment and growth opportunities" that "will be immediately accretive to operating and free cash flow." If sold to UIL, PGW will see its primary obligation turn to shareholders, not its customers.

As with many governors and mayors around the country, Mayor Nutter is facing difficult financial challenges. These needs are driven by two major sources: the effects of the Great Recession, and an antitax movement that would be content seeing our roads, schools, and other important public institutions crumble. As a result, cash-strapped cities and states have failed to meet their obligation to fund their employees' pensions. In March, when Nutter signed an agreement to sell PGW to UIL for $1.86 billion, he announced that he would inject at least $424 million into the employee pension fund.

For many mayors and governors, privatizing public infrastructure seems to provide an easy - almost magical - way to solve unrelated fiscal problems. But what may seem to be the easy fix is rarely the proper fix.

The proceeds from the sale of PGW may sound nice for the city, but that money is not free. Instead, it is an expensive loan, with UIL recouping interest on its investment by increasing gas rates for families and local businesses. The three-year rate freeze that Nutter has touted is riddled with exceptions and exclusions. It doesn't apply to more than a dozen different surcharges and riders, or to the cost of any state-mandated improvements.

We need to get the facts about what is driving privatization of a city utility that has provided an important public service for nearly two centuries, and how privatization will negatively affect the people of Philadelphia.