Tag: public utility

bookmark_borderPGW Offer Withdrawn

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Mayor Michael A. Nutter released a statement following a vote by the Board of Directors of UIL Holdings Corporation to terminate its agreement to purchase the Philadelphia Gas Works:

“This decision by the Philadelphia City Council is a big mistake and represents a massive failure in leadership for our City and our citizens. It is unfortunate for Philadelphia that City Council could not make a public decision in this important matter following public hearings and an up or down vote. Instead, City Council held no hearings and chose a behind-the-scenes decision making process and no action, thus shutting out the public and denying Philadelphians the opportunity to voice their views.

“The citizens of our City, the customers of PGW and our own City workers will feel the negative effects of this terrible indecision for years to come, and ultimately will regret that City Council chose to end a legitimate debate on this issue even before it started.

“The eyes of the city, state and our country, if not the world, are on Philadelphia and looking at how we conduct business, how we treat good companies like UIL and how we handle big decisions.

“The roles and responsibilities of each branch of our government, in a transaction such as this, are clearly set forth in the Home Rule Charter, and unfortunately, in this instance, City Council failed to represent our own vested employees, all of its constituents, and the larger City interests.

“Rather, it allowed small-minded, parochial and often petty issues and interests to get in the way of larger, broader and more innovative opportunities to move forward on behalf of all of our citizens who deserved the chance to see, hear and learn more about an incredible proposal to transform PGW into a true national, if not international, leader in providing energy services.

“I want to thank Mr. Jim Torgerson and his entire team from UIL for their interest, commitment and patience in their efforts to own and operate PGW. I want to thank the many City employees who worked very hard on this proposed transaction, and our many great consultants who provided excellent advice and guidance in this process. They all deserve our thanks and appreciation.

“I look forward to learning more about the often mentioned public-private proposals from Council President Clarke and the Council, how they plan to move PGW forward financially, how they plan to accelerate desperately needed cast-iron pipe replacements, what their plan is to make additional investments in our LNG facilities, how they will take advantage of the nearby Marcellus Shale reserves and how they will make significant investments in our severely underfunded pension system on behalf of our deserving City public employees.

“PGW still needs support and investment, and now that City Council has made its decision to do nothing, it is imperative and vitally urgent that Council President Clarke release his public-private partnership plan in full detail so that the citizen taxpayers and ratepayers can understand his plan for PGW and its future. I look forward to reading that plan soon.”

bookmark_borderPGW Sale Off

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Philadelphia’s City Council has thwarted the Mayor’s efforts to sell PGW (Philadelphia Gas Works). The $1.86 billion sale of PGW was nixed by Council President Darrell L. Clarke. “The simple fact of the matter is that there is not support on the City Council,” Clarke said.

“What we saw today is the biggest cop-out in recent legislative history in Philadelphia,” Mayor Nutter replied.

“This proposed sale was never in the best interests of our citizens, especially the poor and elderly on fixed incomes,” Frank Keel, spokesman for the gas workers’ union, said in a statement. “PGW is a stable, profitable city asset, and we are delighted that it will remain so.”

The Mayor released a statement:

After serving almost four terms in City Council, I have deep respect for its role in government as the People’s Hall, a place where matters of policy, large and small, are debated and then decided in public session with votes by its elected members.

For all the backroom discussions and the maneuverings of lobbyists and special interests, when it comes down to it, Council is the home of transparency, the place where those who want something from the city must stand up and make their case, where they must submit to sharp questioning of every nuance and detail.

It’s because of Council’s special role that all Philadelphians should be upset and disappointed with Council President Darrell Clarke’s stance opposing the mere introduction of a bill to sell the Philadelphia Gas Works and public hearings where the proposed purchaser, UIL Holdings Corp., could make its case and answer months of rumors, lies, and innuendo with facts.

And that’s the second reason Philadelphians should be upset: We have an opportunity to consider an asset sale that would create huge opportunities for new energy jobs, strengthen the city’s seriously underfunded pension system for retirees, and dramatically fix the aging network of gas mains below our streets.

But unless they read the fine print of the report Council released Monday, Philadelphians would not know that Council’s consultant, Concentric, concluded that the sale process was competitive and reasonable, that UIL’s proposal was the best bid, and that PGW’s value was lower than the $1.86 billion price.

Or that UIL explicitly agreed to assume all environmental liabilities related to PGW operations now and in the future.

The Council president asserted that Council conducted an “exhaustive review” of the proposed sale, and yet not a single element of this huge opportunity was submitted to the test of views and questions from Council members or the public in open session. No big city with hopes of attracting business, jobs, and investment conducts business in such a fashion. This is not leadership as we know it. It’s certainly not the history of the City Council that I know.

In its own very brief memo, Council commits a glaring error in describing one of the key terms of the deal: We project that the sale would provide net proceeds in the range of $418 million to $629 million. Council argues that the city would lose its $18 million per year “dividend” from PGW, and therefore the net proceeds would be $200 million to $400 million.

Nothing could be further from the truth. Let’s assume the net proceeds are $500 million. By depositing that amount in the pension fund, the city would see tens of millions of dollars in net savings on how much it is required to put into the fund each year.

With these annual net savings, we’re going to do two things: First, cover the loss of the $18 million PGW dividend. Second, plow the remaining savings back into our pension fund, doing more than state law requires to strengthen a retirement fund that thousands of city employees, current and retired, depend on.

This plan, coupled with other pension reforms achieved by our administration, will move the pension fund into a healthy status more quickly and raise the funding level to above 50 percent within two years of the deposit.

The city general fund would be held harmless and the pension fund would be healthier. That is a unique, once-in-a-generation opportunity. There is no other proposal that achieves both of these goals.

One more example of why we need an open, robust debate on this proposal: With more than 3,000 miles of aging cast-iron pipe, UIL has said it can dramatically increase annual replacement activities through long-term borrowing, something that PGW can’t do with its pay-as-you-go funding model.

What is Council’s proposal to improve infrastructure safety? It calls for a 50 percent rate increase on the funding source of the pipe replacement. Yes, PGW ratepayers, who already have the highest natural-gas rates in the commonwealth, would face an immediate rate hike under Council’s plan.

UIL, which has decided to continue to pursue this sale despite Council’s announcement Monday, offers another approach to infrastructure improvement, along with dozens of other proposals, all subject to change through the legislative process, which would protect consumers, our vulnerable citizens, and the employees of PGW.

But the only way that we’ll get to the truth about this proposed historic sale is for Council to introduce the bill, schedule hearings, give everyone a chance to be heard, and then let Council members do what they’re paid to do – explain where they stand, make choices, and then vote. That’s the way Philadelphia should conduct its business.

bookmark_borderPhiladelphia to Sell Philadelphia Gas Works (PGW)

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The Nutter Administration announced today that it has signed an agreement to sell the assets of the Philadelphia Gas Works (PGW) to UIL Holdings Corporation for $1.86 billion. The sale, which would inject at least $424 million into the City’s pension fund, must still win approval from City Council and then the Pennsylvania Public Utility Commission (PUC), prior to closing.

“When I announced nearly two years ago that the City would begin exploring the sale of PGW, I pledged that I would sign an agreement only if the terms benefited Philadelphia taxpayers and PGW customers,” said Mayor Michael A. Nutter. “This agreement accomplishes those goals and much more. UIL submitted the highest bid for PGW and agreed to contract terms that were important to the City. Our agreement keeps rates frozen for three years, maintains PGW’s discount programs for low-income families and seniors, safeguards PGW employee and retiree pensions and positions PGW to take full advantage of the abundant supply of natural gas in Pennsylvania to make our city and region a prime energy hub.”

Headquartered in New Haven, UIL serves approximately 706,000 electric and natural gas customers in Connecticut and Massachusetts and has combined total assets of more than $4 billion. Its holdings comprise The United Illuminating Company, The Southern Connecticut Gas Company, Connecticut Natural Gas Corporation and The Berkshire Gas Company.

“We are very excited about coming to Philadelphia and getting involved with the community,” said UIL CEO James P. Torgerson. “Energy is our core business and UIL is well suited to operate the natural gas utility business in Philadelphia and make substantive investments in its infrastructure. UIL has substantial experience running an urban natural gas utility and being an engaged civic partner in the communities we serve. We also see this as a great opportunity to explore strategic growth opportunities that will benefit the customers and citizens of Philadelphia. We look forward to working with the City Council and PUC through the approval process.”

Once the sale is complete, UIL plans to operate dual corporate headquarters in Philadelphia and New Haven. PGW will become UIL’s largest operating company, and UIL officials say it is very important to them to become part of the Philadelphia community, including personal involvement in civic activities and financial commitments to charitable organizations.

“PGW will become a bigger, stronger company under UIL’s ownership and that will create more opportunities for us,” said PGW President and CEO Craig E. White. “Our company has made major strides over the past several years, but there are constraints as a city-owned utility that prevent us from realizing our full potential. The ability to react quickly to market opportunities and a greater investment in developing markets will result in a win-win for both the company and its customers and will result in a greater demand for jobs.”

The contract signed by UIL and the City requires that all PGW employees be offered employment at UIL. If an employee decides to retire or accept a job elsewhere, that position may go unfilled, but total employment may not dip below 1,350 employees for at least three years. A privately-owned PGW will require highly skilled employees to maintain and operate the gas company and will ensure that the system continues to deliver gas safely to customers, while improving the gas infrastructure. Like PGW, UIL has strong relationships with the Utility Workers of America. Also like PGW, UIL has a highly diversified workforce and places an emphasis on contracting with minority and woman-owned businesses in selecting its vendors.

The sale will provide substantial support for the City’s pension fund, helping address one of the most pressing financial issues facing the City. After paying off all of PGW’s bond obligations and putting aside funds for other liabilities, including fully funding the PGW pension plan and prudently reserving for residual risks, the City expects to have between $424 million and $631 million remaining, based on current stock and bond markets and reasonable assumptions. The Administration will then deposit the sum into the City employee pension fund. With the pension fund now less than 50 percent funded, this contribution is one part of a strategy to provide additional resources to the fund, while lowering its costs in order to improve that funding percentage.

The Administration proposes other measures to preserve the value of this contribution so that the benefit to the City pension fund will be protected over time without any negative impact on the City’s general fund. The pension funds’ low funded percentage is one of the greatest concerns mentioned by rating agencies, so the deposit should be a credit positive for the City.

Interest in buying PGW, which remains the largest city-owned gas company in the nation, was overwhelming. Thirty-three entities submitted indications of interest last fall. Through a series of bidding rounds the City whittled the field to a handful before finally selecting UIL.

“We thoroughly vetted all bidders and chose UIL for a number of reasons, not the least of which was that it provided us with the strongest contract terms and value. But beyond the numbers, UIL has an outstanding safety record, excellent employee and customer relations, credibility, a commitment to infrastructure improvements, and is a valued corporate citizen in the communities it now serves. I am confident that City Council and the citizens of Philadelphia will arrive at the same conclusion as I have: that UIL is going to become a great addition to our City,” Mayor Nutter said.

PGW is the nation’s largest municipally-owned gas utility, with annual revenues of more than $600 million, more than 500,000 residential, commercial and industrial customers, and more than 1,600 employees. Read more about the sale process and submit questions or comments at www.exploringasale.com.