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State Regulators to Probe Safety of Philadelphia Gas Works Infrastructure

The Pennsylvania Public Utility Commission (PUC) this week said it would conduct an "in-depth" investigation into the safety and replacement of the Philadelphia Gas Works' (PGW) aging distribution system.

The agency said it would share its findings in a full report. PUC commissioners decided that such an analysis is necessary after a hearing in November to discuss PGW's future, where concerns were voiced about more than 1,000 miles of aging cast iron pipelines and the estimated 80 years it would take to replace them.

"We discussed many issues with PGW at the en banc hearing, but our biggest concern continues to be the safety of Philadelphia consumers, which is threatened by at-risk pipelines and an alarmingly slow replacement schedule," PUC Chairman Robert Powelson said. "We will take an in-depth look at PGW and determine what may be done to accelerate this process and avoid tragic accidents, while at the same time being mindful of how much of a burden ratepayers can bear."

Under state law, gas utilities can increase customer bills up to 5% to pay for infrastructure upgrades. The city has been exploring ways it can better take advantage of the Marcellus Shale boom. On Monday, PGW announced an open season for nonbinding proposals to purchase liquefied natural gas (LNG) to assess the market potential for its liquefaction capabilities and expansion. In fiscal year 2014, PGW sold more than 1 Bcf of LNG to customers.

Still, PGW, the nation's largest municipally-owned gas utility, remains underfunded. Last year, UIL Holdings Corp. agreed to purchase the utility for $1.86 billion and pledged to upgrade its infrastructure, expand services, increase capital investment and freeze rates through 2017 (see Daily GPI, March 3). But in October the city council rejected the deal, citing a review that found the permanent loss of PGW's annual $18 million payment to the city would reduce the sale's net benefit and risk local jobs if the utility was privatized (see Daily GPI, Nov. 3, 2014).

After that decision, UIL terminated its agreement, setting the stage for the PUC review (see Daily GPI, Dec. 5, 2014) Citing public records, the PUC said 1,994 miles of PGW pipeline is considered "at-risk" and in need of replacement.

"PGW has the highest percentage of risky pipeline versus total miles of main of any Pennsylvania natural gas utility by a factor of two," the PUC said. "At the current rate of pipeline replacement, it will take about 80 years to replace all at-risk pipe."

PGW manages and maintains more than 6,000 miles of gas mains and service pipes that deliver roughly 78 Bcf annually to more than 500,000 residential and commercial customers.

The PUC ordered all relevant bureaus to begin work on a three-step analysis. The agency will review the current condition of PGW's system integrity, analyze the utility's current pipeline replacement schedule and identify problems that are slowing replacement and ways to accelerate that schedule.

The PUC did not say when its analysis would be complete or when a report would be released.

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