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PGW Requests Rate Hike to Fund Pipeline Replacement

Philadelphia Gas Works (PGW) has filed a request with state regulators to increase its customer's infrastructure surcharge by 2.5% so it can replace outdated cast iron natural gas mains at a faster pace.

PGW, the nation's largest municipally-owned natural gas utility, submitted its petition to the Pennsylvania Public Utility Commission (PUC) earlier this month, outlining its plans to replace the mains in 48 years, or in nearly half of the 88 years it would take under a previous plan filed with the PUC. Earlier this year, the commission released a report that said PGW has the highest percentage of at-risk pipes of any gas utility in the state by at least a factor of two (see Daily GPIApril 22).

If the PUC approves PGW's request for a distribution system improvement charge, the company's infrastructure surcharge would increase from the current 5% to 7.5%. PGW said under the increased rate a typical residential customer using 83 Mcf/year of natural gas would see their bill increase by $1.65, or 1.7% per month. PGW serves more than 500,000 residential and commercial customers.

PGW has also struggled with funding. A deal for UIL Holdings Corp. to purchase the utility for $1.86 billion fell through last year after the Philadelphia City Council rejected it over concerns that the city would lose millions of dollars in annual payments (see Daily GPINov. 3, 2014March 3, 2014). About two-thirds of PGW's pipelines, or 1,994 miles, are considered at-risk and in need of replacement, according to the PUC. In its report, the commission recommended that PGW raise more cash through asset sales, consolidate facilities and cut management to accelerate the replacement of its aging infrastructure.

The PUC said PGW could request a waiver that would allow the utility to increase its distribution charges above the current 5% cap for investment in its systems. The city council has already approved an increase in the company's capital budget for more mains replacement.

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