PA Legislature to Decide PGW's Fate

While Pennsylvania's gas deregulation bill for residential and small commercial customers has grabbed most of the focus from the state's gas industry, the fate of Philadelphia's embattled municipal gas utility, Philadelphia Gas Works (PGW), will also be decided during the current legislative session. A movement has arisen in both the state Senate and the House of Representatives to attach an amendment onto the deregulation bill which will shift PGW control from the city government-selected Gas Commission to the Pennsylvania Public Utilities Commission (PUC).

PGW is one of the largest municipally-owned gas utilities in the country. Due to high bill paying delinquency, management instability and weak liquidity, the independent bond-rating agency Moody's has given PGW a "Baa2" investment-grade rating, the lowest possible rating without being considered a junk bond.

The city government, including Ed Rendell, the city's mayor, have voiced opposition against shifting control of PGW from the city. This constituency, which includes the mayor and some city council members, said a shift of control could put a $860 million of tax-exempt bonds at risk and end a 20% city discount PGW gives to senior citizens.

Many parties in the state government, however, think a change should be made, including the House Majority leader, John Perzel and the Senate Majority Caucus Secretary, Hank Salvatore. "The Gas Commission is made up of politicians, whose interests aren't necessarily the same as even-handed state regulators looking to serve all customers," said Perzel spokesman Stephen Drachler.

With the session ending on June 15, a vote on the issue is expected within the next week.

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