PGW is at crossroads — and that should concern everyone | Opinion
Every PGW stakeholder from the mayor to regulators to employees to customers should take notice, now, of the perfect storm building around PGW.
Over its 185 year history, PGW has experienced many periods of decline and recovery. During the last downturn in the 1990s, the utility was bordering on collapse. The demise was characterized by a revolving door of ten CEOs over a 20 year period, political over business judgement, terrible customer service, a disheartened employee corps and, ultimately, a disastrous billing software installation that took the cash balance of a $1 billion enterprise to near zero. The only saving grace was the core of competent operating personnel able to keep the gas flowing.
The last recovery began in January 2000 with the inauguration of Mayor John Street. The Mayor put in place a strong board of directors composed of known and experienced leaders from industry, non-governmental organizations, the faith community and just two members from the Administration. The newly constituted management team undertook a broad range of operational and organizational changes to rebuild the utility. By 2009, the Gas Works bonds had been upgraded to investment level, customer service performance was meeting PaPUC standards, industry best practices were in place across all departments and pension and post-retirement benefits funding was moving toward, and is now well above, government norms. Moreover, PGW has had only two Chief Executive Officers between 2001 and 2020 and is recognized as a well-functioning utility among its peers and the business community at large. The gains have held. PGW more than turned a corner.
Unfortunately, the Gas Works is again at a crossroads with four converging challenges. The call for reductions in the use of hydrocarbons strikes at the very heart of the utility’s business model and financial viability. Local proposals for the marked reduction in natural gas use may be deemed essential by many but, if not addressed very responsibly, will be catastrophic for PGW ratepayers, bond holders, employees, and, indeed, for all citizens and the City itself. Also, it is a major business concern when capable people depart over a short period of time. That is the current circumstance at PGW. Craig White, PGW’s CEO, will leave at the end of next year while PGW’s Chief Operating Officer (COO) is leaving at the end of this year. Each has over 40 years of experience; the types of backgrounds that are critical to maintaining operating excellence and providing customers the service they deserve.
Other senior personnel have recently left or will be leaving soon, as well. The Board of Directors is changing. The most recent Chairman has resigned in order to take the soon-to-be vacated COO position and, with Mr. White’s retirement, will assume the positions of president and CEO. To compound concerns about executive leadership, there is movement away from the type of experienced Board created 20 years ago that was critical to PGW’s success. For example, the current Board does not have a single member with experience in the natural gas or energy sector. That coverage is now provided by the current CEO, a non-member. Last, the demands of the COVID-19 pandemic have imposed a necessary moratorium on bill payment by many at-risk PGW customers. There is always concern when cash flow is potentially compromised.
Every PGW stakeholder from the Mayor to regulators to employees to customers should take notice, now, of the perfect storm building around PGW that can undo two decades of growth and progress: a proposed response to global warming that could prove to be an existential threat, the loss of key executive talent that cannot be easily replaced, the weakening of governance so crucial to effective agency functioning and the potential for financial losses. Time is short. It is incumbent upon any stakeholder who has an interest in the viability of the utility to not allow the Gas Works to once again slip into decline. There is a need for a serious, public discussion about the future of PGW and how the City Administration and the utility leadership can resolve these four challenges.
Tom Knudsen served as President and CEO of PGW from 2001 to 2011.