Philadelphia tries to decide what to do with PGW
The city of Philadelphia has been wrestling with a decision over what to do with city owned utility Philadelphia Gas Works (PGW).
Mayor Michael Nutter spent two years, and PGW spent more than $2 million, in order to attract a buyer for the utility, reports Philly.com. After attracting a buyer, UIL Holdings Corp. (ticker: UIL) of New Haven, Connecticut, Nutter had hoped to sell PGW for $1.86 billion in a deal that would get Philadelphia out of the energy business and bolster its struggling pension fund.
Not everyone is satisfied with this deal, however. Philadelphia City Council President Darrell L. Clarke announced that the Council would not consider the UIL sale, according to a separate Philly.com report. Opponents of the sale say Mayor Nutter did not consider alternatives before he launched the formal sale process in 2013. The UIL agreement to purchase PGW was announced in March 2014.
Concentric Energy Advisors was commissioned to conduct a study of the city’s best options regarding PGW. Concentric’s report is entitled Philadelphia Gas Works Highest and Best Use Study. The report was presented to the Philadelphia City Council in Oct. 2014.
One of the alternatives is expanding PGW’s LNG plant to produce more liquefied natural gas. PGW already owns a LNG plant on Port Richmond Waterfront that is operating under capacity, and could be used to satisfy a lucrative market if expansion of its liquefaction capacity is undertaken.
The Concentric report said that PGW could more than double its profits from off-system LNG sales to $7.7 million to $10 million a year, recovering the cost of a LNG liquefaction plant expansion in four to eight years.
In its report, which explored several ways to increase PGW’s revenue and reduce costs, Concentric said PGW could achieve the biggest saving – up to $17 million a year – by buying natural gas from the Marcellus Shale region rather than from Gulf Coast producers. Concentric said that it viewed “a dramatic expansion to serve LNG export markets as unrealistic and non-viable under any PGW partnership or ownership structure.”
Concentric said “PGW is too late to the competition” to export LNG from Philadelphia, but that expanding their operation would more closely conjoin the utility to a growing private-sector movement to build up the region as the Marcellus Shale energy hub.
Other options in the Concentric report included PGW supporting the creation of a regional natural gas vehicle (NGV) market.
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