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Firm Hired To Analyze Proposed Sale of PGW Finds Several Issues With Deal

By Mike Dunn

PHILADELPHIA (CBS) -- A consultant hired by Philadelphia City Council to analyze the proposed sale of PGW focuses on several issues with the deal, including the possibility that the buyer could simply flip PGW to another buyer.

The analysis by Concentric Energy Advisors was six months in the making, and council members have finally received detailed briefings on the findings. The two reports to Council have not been made public, but council member Maria Quinones Sanchez says they spell out several areas of concern that the buyer, UIL Holdings, would have to address during coming hearings. Among them: the possibility that UIL would turn around and resell either PGW's Liquid Natural Gas facility, or resell the entire utility.

"The concern is -- what is to stop a company from coming in, figuring out it can't make a profit, flipping it or splitting it, Quinones Sanchez says, "and creating a situation where the city would be dealing with two potentially different entities?"

Also questioned by the consultant, according to Quinoes Sanchez, is one key premise of the sale -- that private owners would run a tighter ship, thus keeping rates down.

"The ability for a private company to be more profitable or efficient is not as clear cut as folks would like us to believe," she says. "So it's a very complex deal."

In the sale agreement, UIL vows to keep base rates frozen until 2018. Quinones Sanchez says the consultant though raises questions about whether the deal adequately safeguards the preservation of programs that help low-income families and seniors.

"The deal as structured does not provide enough protection," she says. "And I'm not sure if there's enough political will to get the deal (revised). But it's clearly something that has to be discussed in a very public forum."

One of the two reports by Concentric, a nationally recognized utility consultant, focuses on the specifics of the mayor's deal with UIL. The other focuses on the larger question of the best use of the city-owned utility.

Quinones Sanchez confirms that neither report gives an explicit thumbs-up or thumbs-down on the proposed sale.

"Concentric was very good in giving us a financial analysis and a best-use analysis without answering that question," she says. "Because ultimately as elected officials, we have to make a determination whether short-term or long-term, this is in the best interest of the city. And the complexity of the deal doesn't make that a clearcut yes or no."

With the Concentric analyses complete, Council president Darrell Clarke says that later this month he'll announce how Council will proceed with its deliberations on selling PGW. Under the deal, UIL would pay the city nearly $2-billion. Mayor Nutter says about one-quarter of the proceeds would go to shore up the struggling city workers pension fund.

Jane Roh, a spokesperson for Clarke, said the reports have not been finalized and, while ouncilmembers have been briefed, they have not been given copies.

Roh stressed that the consultant's reports make no judgements about the various issues raised.

"Concentric Energy Advisors was hired by Council to assess the merits of the Nutter administration's proposed transaction with UIL and conduct a study on higher and better uses for PGW," Roh said in an e-mail.  "Concentric's reports on the proposed sale of PGW, which are still being finalized, will not inform City Council on whether to sell or retain ownership of PGW.  Councilmembers will reach their own conclusions about the potential sale individually based on information contained in the reports and public input."

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