Smelt it, dealt it? Evans wants to pass gas... company to another entity (The Next Mayor)

One of the more complicated and not-so-glamorous issues of the 2007 mayor's race is going to be what should be done with the Philadelphia Gas Works. Saddled as it is with over a billion dollars in debt, apparently from being mortgaged so many times to pay off the city's bill when it landed on Boardwalk with a hotel (500,000 times), no other mayoral administration since Rizzo has known what to do with this utility. (And apparently, Rizzo's idea was to use it as a patronage haven.)

Now, to the debt, add (1)the fact that the infrastructure is aging (hmmm, "aging infrastructure" + explosive gas, this ought to be interesting), (2)many of the customers are low income, and (3)PGW is restricted by law from selling its product outside of city limits and you get the following equation:

$1 billion debt + explosive gas in old pipes + poor people in the cold + no wealthy suburban customers = Can I run for Food Court Judge?

PICA, not an agency that's staffed with crazy, hyberbolic fortune tellers, actually said:

As PICA has said in its last several staff reports, PGW is one of the most difficult issues facing the City. Not only is it one of the few issues that could quickly create a fiscal crisis for the City, but it is also unlikely the City will be able to craft a solution to PGW’s financial problems without outside help.

It's no wonder no mayor has wanted to deal with this. Perhaps we need a Paul Vallas-type to fix this hopeless situation.

So part of my evaluation of our potential mayoral candidates will be based on whether or not they raise these issues and at least try to offer some solutions, no matter how difficult those solutions may be or how hard it will be for people to hear them. As Catherine Lucey, Wendy, and Michael Currie Schaffer & Marcia Gelbart said in their accounts of yesterday's African American Chamber of Commerce forum, none of the candidates really stepped out on the major issues of crime, jobs and education.

I suppose Nutter came close when he proposed dismantling MBEC and replacing it with a small business department with a clear mission that could provide better aid to minority businesses. Afterall, he does risk having an opponent run his comments out of context in an ad that says "Michael Nutter wants to dismantle the city agency that helps minority businesses. Michael Nutter doesn't care about black people." But I do give him credit for making perhaps the boldest statement of the event.

However, today's winner for taking on the difficult issue referenced in the title of this post is Dwight Evans. From today's DN:

State Rep. Dwight Evans plans to introduce legislation giving the state Public Utility Commission the power to force the sale of the city-owned Philadelphia Gas Works.
...
According to Evans' proposal, before ordering the sale of PGW, the PUC would have to look at: reorganizing PGW under new management, contracting PGW's management to another company, appointing a receiver to run PGW, expanding PGW's service territory beyond city limits, or securing state, federal or local government funds to place the company on sound financial footing.

Now, when I was a young lad working on a doomed mayoral campaign in 2003, I had to write a briefing for the candidate as he prepared to meet with the union representing the gas workers. I spoke to the President of the union to get some information and was essentially told that any proposal to sell the gas works was a deal breaker for getting the support of the union. I passed that info along to the candidate and he went into that meeting and told them that he absolutely wouldn't sell the gas works. He pretty much said that with a billion dollars in debt, who would want to buy it anyway? Regardless, he got their endorsement.

Now, it's almost always better to have the endorsement of a union instead of not having it. So unless the union's position on the sale of PGW has changed, on the metric of "is this a risky announcement?" the answer is yes. The general public probably can't grasp the fine points of his proposed legislation and the likelihood that passing such a law would lead to a miraculous healing of PGW in time for Evans to run on it in the spring is low. He may never have counted on the support of the Gas Workers union but still, he could have at least avoided being actively targeted by them.

Clearly, PGW is in trouble and every time my gas rates go up or they forget to mail me a bill, I see just how much that trouble affects the residents of Philadelphia. I'll keep my opinion about the soundness of Evans's policy to myself but as I said before, he gets credit for putting something out there.

Comments (17)

James:

I admire Mr. Evans for standing out on a ledge with this one. But it has the same sort of usefulness as Mr. Nutter's comments two weeks before the ward leaders, instead of the voters, selected the democratic candidates for the vacant council seats. It's a nice idea, it may get him some press, it certainly alienates some people, but it's unrealistic. No one is going to buy PGW. Private companies will buy if it's fiscally beneficial, but I don't see $1 billion in debt appealing to anyone. If Mr. Evans could sell this idea to anyone as realistic, than I'd listen, but it seems like he's throwing fireballs to get in the headlines.

Posted by James | November 9, 2006 2:36 PM

Dave:

I think the most realistic option may be for the city to retain ownership of PGW, but to contract daily operations out to an outside bidder, possibly along with expanding service beyond city limits (I hadn't thought of this before, but it sounds like a good idea -- assuming any suburban government in its right mind would allow it). Savings and revenue increases from these should go straight into paying down that $1B in debt, which should make the agency more appealing to a future buyer.

Evans gets points for including both of those ideas in his proposal (at least I assume he was referring to the former with the text: "contracting PGW's management to another company").

Posted by Dave | November 9, 2006 3:07 PM

I would agree that expanding coverage to the suburbs would definitely help, but it seems that the suburban communities would be hostile to that offer. First off, they already have servicers. Second, with $1B in debt, I can't imagine that PGW would offer a less expensive alternative. Not that we should throw our hands in the air and give up, but restricting its servicing contracts to the City/County seems to have really put the company in trouble. Maybe the best way to do this is contract the management to one of the suburban servicers.
One problem with contracting PGW to another company is that the other company wants to make a profit. One way of doing that is raising rates, something I imagine Mr. Evans, and the rest of them, would like to avoid.

Posted by James | November 9, 2006 4:05 PM

Roy Philip:

Hello

PGW has many low-income income customers. Why not educate them to be high-income customers?

A billion dollars shouldnt worry you, dont focus on the external. Rather focus on the internal instead. Focus on true capital generation.

Royls,
Philosopher,
Philadelphia
http://www.amazon.com/Dont-Get-Hustled-Higher-Level/dp/1847286925/sr=8-3/qid=1163095947/ref=sr_1_3/102-2605660-5218545?ie=UTF8&s=books

Posted by Roy Philip | November 10, 2006 9:56 AM

Steve:

What happens to the poor people who cant afford to pay for gas when some profit making company owns the gas company. Prices have to go up to pay for the executives private jets and multimillion dollar houses.

Posted by Steve | November 10, 2006 10:29 AM

What happens to poor people when PGW is charging them some of the highest rates in the nation for natural gas?

Posted by Dave | November 10, 2006 11:41 AM

... and those rates are even higher than the rates charged by many/most of the "profit making companies," and what customers pay still doesn't cover PGW's operating expenses.

Posted by Dave | November 10, 2006 12:34 PM

Anonymous:

P.S. when customers' payments to a government owned energy company don't cover operating costs, the difference generally comes out of people's (I.e. customers') tax dollars, as is the case with the loan PGW received from the city and still hasn't paid back. This basically means the rates paid by customers are even higher than the agency says they are.

I'm sure I can come up with more of this stuff...

Posted by Anonymous | November 10, 2006 12:52 PM

Dan:

It seems that PGW should get some pretty good exposure on thenextmayor.com. Thanks for the input everyone. I hope I can count on all of you to be the b.s. meters when we have a candidate forum and put that issue to the candidates.

Posted by Dan | November 10, 2006 2:45 PM

Former City Resident:

I just moved out that God Forsaken place (Philadelphia) because of things like this. Now that I live in the suburbs I DON'T WANT PGW TO SUPPLY MY GAS.........I am very happy with PECO as my supplier and would protest any such idea.....I have a larger home and pay less for my heat and electricity....because I'm not paying for someones mistakes and deadbeats who don't pay... Also, until the corruption ends in City Hall (HA HA HA) anything the city manages will always be in debt.......Just think of the city government as the REVERSE MIDAS TOUCH no matter who it is......

Posted by Former City Resident | November 13, 2006 12:43 PM

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