UIL won't pull plug on $1.86B bid for PGW

UIL Holdings Corp. is not ready to pull the plug on its embattled bid to buy Philadelphia Gas Works.

The Connecticut energy company announced Monday night that it would continue to pursue the $1.86 billion purchase of the nation's largest municipal gas utility, despite City Council's refusal to hold hearings on the sale.

The deal expires at year's end if it is not approved by Council.

"The transaction made strategic sense for UIL when we announced the agreement in March of this year, and continues to make strategic sense today," James P. Torgerson, UIL's chief executive officer, said in a statement.

"Accordingly, with time remaining for the City Council to consider the transaction at its upcoming meetings, we believe that it would be premature to exercise our right to terminate at this time."

Council President Darrell L. Clarke announced two weeks ago that Council would not consider the sale to UIL, which operates four New England utilities.

Mayor Nutter and his allies have desperately sought to persuade Council members to introduce the legislation authorizing the sale, saying that many of Council's concerns can be addressed.

"Hopefully we can get an opportunity to make our case," said Michael A. West Jr., UIL's spokesman.

Despite Council's action to halt debate, the sale to UIL was very much alive Monday as rival partisans attempted to rally public opinion.

City Councilwoman Marian B. Tasco, the head of the Philadelphia Gas Commission, fired back at Pennsylvania utility regulators who scheduled a public hearing for this week on PGW, calling the state inquiry a "thinly veiled effort to intrude" on city business.

Tasco wrote to Public Utility Commission Chairman Robert F. Powelson on Friday saying she was "troubled" at the PUC's interest.

"You and other PUC commissioners have openly and repeatedly expressed support for a sale of PGW," wrote Tasco, a privatization foe. "This hearing therefore appears to be a thinly veiled effort to intrude on decisions that are the sole prerogative of the city, as owner of this valuable asset."

Tasco went on to criticize the PUC as citing "misleading" information in its portrayal of PGW's high rates, aging infrastructure, and safety record.

Tasco's is one of the more overt expressions of the tension between Council and the state commission charged with ensuring the safe and reliable delivery of utility service at a fair price.

The PUC said its hearing Friday at Drexel University would not focus on the scuttled sale process, but on how PGW planned to address its financial challenges. Clarke responded by scheduling Council hearings on PGW's future for the same date as the PUC's event. Clarke's spokesman called it a "coincidence" that the two hearings would overlap.

The PUC and the Gas Commission have been at odds since the Pennsylvania legislature ordered the state regulatory agency to assume oversight of PGW in 2000. The Gas Commission, which previously regulated all aspects of the utility, retained control over PGW's budget, but not its rates.

A new PGW management team brought the utility back from the brink, improving collections and efficiency. But the PUC has complained that its authority is hampered by the city's overlapping regulatory role. PUC members also say an investor-owned utility would be able to attract more capital needed to rebuild the aging system.

Tasco took issue with the PUC's characterization of PGW's financial and structural conditions, saying it distorted the utility's record by comparing it to dissimilar utilities.

While PGW is on course to replace its aging gas mains in 88 years, Tasco said that most of the "high-risk" cast-iron mains would be removed in 50 years.

The PUC emphasized that a typical PGW residential customer pays almost $600 more per year than customers of other state gas utilities, and large commercial Philadelphia customers pay almost $20,000 a year more. Tasco said PGW's rates are largely a function of the city's large low-income population.

"The proposed sale of PGW will not change Philadelphia's demographics," she wrote.

Council spokeswoman Jane Roh on Monday circulated a point-by-point rebuttal to a six-page list the Nutter administration issued last week that outlined what it called "myths" opponents have advanced about the UIL deal.

And Gas Workers Local 686, which opposes the sale, began airing commercials on WURD-AM arguing that private ownership is a bad deal for the city.

"UIL wants to come here to make money for their investors on our backs," the ads state. "Tell Mike Nutter . . . no means no."

Source: Philly.com