Press Release

PUC Approves $60 Million in Emergency Rate Relief for PGW with Conditions

Published on 12/18/2008

Filed under: Gas

HARRISBURG – The Pennsylvania Public Utility Commission (PUC) today approved $60 million in emergency rate relief for Philadelphia Gas Works with conditions.

The Commission voted unanimously to approve a joint motion by Commission Chairman James H. Cawley and Commissioner Wayne E. Gardner that allows the company to raise its base rates by $60 million (5.2 percent) effective Jan. 1, 2009. The base rate increase is not permanent and will be reviewed in a bate rate proceeding on or before Dec. 31, 2009.

The increase, combined with a $107 million decrease in purchased gas cost rates, will result in a net decrease of 4.2 percent for customers.

“The Commission is concerned for the financial health of all of our regulated utilities,” said Commissioner Gardner. “Because of that we are granting this rate relief and taking positive steps, with the assistance of the company, to assure that the rate increase that we are approving today will have the intended impact of moving PGW towards financial stability.”

“I am very concerned with PGW’s current financial situation and the potential ramifications if it is unsuccessful in its efforts to convert its long-term bond issues or to roll-over its commercial paper,” said Vice Chairman Tyrone J. Christy in a statement. “I believe it is incumbent upon the Commission to understand the seriousness of PGW’s unique situation and to address it in a proactive manner.”

The Commission committed to working with PGW to ensure that the money from the base rate increase will be used to improve PGW’s long-term cost structure, to provide lower financing costs in the future and to provide more reliable service. Within 60 days of the entry of the Commission’s Order, PGW must:

• File a detailed plan to implement its Business Transformation Initiative-Full, which is designed to realize the estimated benefits of the emergency rate relief. PGW also is to provide detailed descriptions of the initiative including yearly costs and benefits. 
• Submit for Commission review a performance-based incentive compensation plan that will hold management accountable for improving the fiscal standing of the company.
• Convene a collaborative process to explore options for transitioning some of all of its customers to an alternative default service supplier.

To ensure the rate increase is having the projected positive effect on PGW’s cash position and investment in necessary infrastructure, the company also must provide monthly updates on various expenditures and other financial dealings.

Also, within 90 days of beginning negotiating its next employee bargaining agreements, PGW must file a plan for improving performance and implementing efficiencies for hourly employees. This plan should also include some degree of performance-based incentive compensation and set forth a thorough cost benefit analysis.

In separate action, the Commission approved a joint motion by Vice Chairman Christy and Commissioner Robert F. Powelson that creates a working group of stakeholders that will examine the existing problems faced by PGW and propose solutions to those problems.

“PGW’s ongoing problems must be addressed in a creative and aggressive manner,” said Commissioner Powelson. “The conditions placed on this rate increase are an important step but we must work collectively with PGW and the city if we are going to ensure that this company can provide safe, reliable and affordable service to its many customers.”

 The Pennsylvania Public Utility Commission balances the needs of consumers and utilities to ensure safe and reliable utility service at reasonable rates; protect the public interest; educate consumers to make independent and informed utility choices; further economic development; and foster new technologies and competitive markets in an environmentally sound manner.

For recent news releases, audio of select Commission proceedings or more information about the PUC, visit our Web site at www.puc.state.pa.us.

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Docket No. R-2008-2073938

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