In the 13 years since the Economy League's last study of the Philadelphia Gas Works (PGW) found it had become a risk to the City and its customers, the City-owned utility has taken strides in the right direction. Better billing practices and enforcement tools have repaired PGW's once-chronically deficient collection rates. PGW has repaid an eight-year-old loan from the City, and the utility's improved credit outlook could lower future capital costs. With a management plan to build on this momentum, a new administration in City Hall, and new mayoral appointees on PGW's executive board, it is time to ask whether a lasting remedy is finally within reach.
Although PGW is no longer in crisis, its ailments have merely shifted from acute to chronic. Despite improvements, its rates still outpace the cost of gas service in Philadelphia's peer cities. PGW remains too troubled for the City to profitably sell, yet keeping it will require difficult decisions about reducing subsidies to low-income customers, seeking even higher rates, allowing its workforce to shrink, and spending tens of millions to improve its efficiency. If the City declines to make fundamental changes, it will continue to forgo any return on PGW's considerable assets, PGW's debt will keep mounting, and residents will be saddled with ever-higher gas bills.
This report was commissioned by Pew prior to the existence of the Philadelphia Research Initiative.