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Regulators Lift Philadelphia Gas Works’ Old Pipe Replacement Charge

The Pennsylvania Public Utilities Commission (PUC) has approved a number of actions to help Philadelphia Gas Works (PGW) replace its aging natural gas distribution pipelines.

PUC unanimously approved a waiver allowing PGW to increase the cap on its distribution system improvement charge (DSIC) -- earmarked for infrastructure replacement -- from 5% of billed revenues to 7.5%.

PUC voted to allow PGW to adjust its DSIC recovery annually rather than quarterly, and it also directed the utility to begin tracking DSIC proceeds and expenditures through a separate accounting mechanism.

The actions are in accordance with a PUC staff report released last year that made seven recommendations for how to address PGW’s aging pipeline infrastructure (see Daily GPI, April 22, 2015). The report was the result of an “in-depth” PUC probe into the safety of PGW’s distribution system (see Daily GPI, Jan. 13, 2015).

“It is clear from the record that PGW requires additional funds to more rapidly replace its aging pipe. With that said, I am also keenly aware of the additional burdens this places on the ratepayers of PGW,” PUC Vice Chairman Andrew Place said. “Therefore, I also strongly suggest that PGW work closely with commission staff to look for additional, internally generated funds to supplement these DSIC revenues for the purposes of further acceleration of their pipeline replacement investments.”

The municipally-owned PGW, which serves 500,000 residential and commercial customers, has the highest percentage of at-risk pipelines among Pennsylvania gas utilities “by at least a factor of two,” according to the PUC. At its 2014 rate, it would take PGW 66 years to replace its at-risk pipelines, which include “both cast iron and bare steel” pipes, PUC said.

“Approval of the revised DSIC will not completely resolve the infrastructure problems at PGW. It is only a part of the solution,” Commissioner Robert Powelson said. “Other suggestions for updating PGW’s cost structure, workforce and governance have been previously discussed” in another audit and in last year’s staff report.

PGW has been directed to file a petition to amend its long-term infrastructure improvement plan within 15 days of PUC’s final order.

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