UIL Holdings Corp. has terminated its $1.86 billion agreement to purchase Philadelphia Gas Works (PGW), the nation’s largest municipally-owned gas utility, after the city council’s decision in October to rule out what it deemed a risky sale.

The city council didn’t vote on the matter and never introduced a bill to sell the utility, reaching its decision after what it called an “exhaustive review” in which it found that the permanent loss of PGW’s annual $18 million payment to the city would reduce the net benefit of the transaction and risk local jobs if the utility was privatized (see Daily GPI,Nov. 3). UIL said late Thursday that with no clear action by the city council since its decision, and with “none in the foreseeable future,” it was forced to terminate the agreement under its contractual rights.

“Unfortunately, we had no choice but to terminate our efforts in the city of Philadelphia to acquire the PGW assets,” said CEO James Torgerson. “We are extremely disappointed that no ordinance was introduced to approve the acquisition and we’re equally disappointed that we were not afforded a hearing to present the facts regarding our bid proposal. Philadelphia and the city’s gas customers would have benefited from our accelerating the pace of pipe replacement and from our management of the PGW assets.”

In March, Philadelphia Mayor Michael A. Nutter announced a deal for the city to sell the faltering and underfunded PGW to UIL, which pledged to upgrade the utility’s infrastructure, expand services, increase capital investments and freeze rates through 2017 (see Daily GPI, March 3).

In a statement released after UIL terminated its agreement, Nutter called the city council’s decision ruling out a sale “small-minded” and said it was influenced by “parochial and often petty issues and interests.”

“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,” he said.

But council President Darrell Clarke fired back and said the debate about PGW’s future is far from over, adding that it should be one had by the city “with all stakeholders at the table.”

“It is unfortunate that Mayor Nutter chose to pursue an extremely narrow deal to privatize PGW that ignores opportunities to increase Philadelphia’s economic output,” Clarke said. “This deal would have resulted in significant job loss among Philadelphians by allowing UIL to layoff employees and to shift jobs away from experienced PGW workers.”

Neither side blamed UIL for its decision. Under the contract, the asset purchase agreement would have automatically terminated on Dec. 31. It remains unclear how the city now plans to move forward financially with PGW.