At some point Philadelphia will have to choose: It can either keep running the nation’s largest municipal gas utility or achieve its goal of net-zero greenhouse gas emissions by 2050. The city can’t do both and the time to pick a side is running out.

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Philadelphia Gas Works serves nearly 500,000 residential customers, many of whom are low-income households struggling to pay their bills in one of the most energy-burdened cities in the country. The utility also employs about 1,600 people. Every time the city takes steps to reduce emissions from buildings — for example, providing a rebate to a household installing solar panels or investing in efficiency improvements for schools — it becomes a bit harder for PGW to maintain the level of revenue the utility company needs to operate.

This contradiction is the reality of maintaining a natural gas apparatus in an era that, according to U.N. Secretary-General António Guterres, should usher the “death knell of fossil fuels.” With a new report, Philadelphia just took the first step toward resolving this contradiction — and figuring out the future of PGW.

A first step in a long road

In December, Philadelphia published the PGW Business Diversification report, which the city’s director of sustainability, Christine Knapp, and PGW president and CEO Seth Shapiro called “a first step to help envision a successful, lower carbon future for PGW.”

The report is clear-eyed on the problem: Combustion of natural gas represents 24% of greenhouse gas emissions in Philadelphia and PGW maintains 6,000 miles of old pipes. The utility is governed by a complex regulatory structure and serves a low-income customer base that needs to see its gas bills go down, not up.

The solutions are less clear. The report proposes a slew of recommendations and three “near-term” pilot programs: a loan program for low- and moderate-income customers that will help finance home weatherization projects, a program to test if geothermal energy could be used to heat Philadelphia homes, and a program that experiments with biological sources of natural gas (such as biofuels processed from landfills from across the country) as alternatives to fracked gas in the PGW system.

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Each of these proposals has its drawbacks. For example: It’s unclear how a weatherization financing program, while bringing in revenue for PGW, will help maintain good union jobs — or why the city, particularly at a time when infrastructure and weatherization funding is coming from Congress, would consider asking already burdened low-income households to take on new debt.

The regulatory challenges

Will PGW be able to implement any of the changes outlined in the report? The answer is unclear, in large part because of the narrow parameters that the state allows the utility to operate within.

Last summer, the Pennsylvania Public Utility Commission blocked a proposal by PGW to replace a small amount — less than 1% — of its fossil fuel gas with biofuel. The commission shot down the project, citing state law that requires PGW to use the cheapest available source of natural gas.

Another challenge is that PGW has statutory limits on how it can spend revenue that comes from providing gas to households. This means, for example, that it’s not certain that PGW would be allowed to fund a geothermal feasibility.

And things could get even worse.

In October, the state Senate passed a bill with a veto-proof majority that would preempt municipalities from restricting the types of energy used in buildings. If the bill passes the House and is signed into law, Philadelphians will have even less of a say in deciding the future of PGW.

Getting creative

This year, the Office of Sustainability is starting to work with the city’s Law Department on a deeper review of the regulatory structure of PGW — something that the diversification study highlights as a challenge. In other words, who gets to decide exactly what changes the utility can undergo and who has the power to block it? The review has the potential to shine a light on the path for PGW to move toward a fossil-fuel-free future that is not blocked by state regulators or legislators in Harrisburg.

“When you have a roadblock you can either say ‘we can’t go forward’ or become creative,” City Councilmember Derek Green, who chairs the Philadelphia Gas Commission, told The Inquirer.

Philadelphia’s goal for PGW shouldn’t be to find a use for 6,000 miles of old pipes. Instead, Philadelphia needs to think creatively about ways that the utility can utilize its workforce, revenues, and — if appropriate — existing infrastructure in a way that solidifies commitment to jobs, housing justice, and climate change. The energy future of our city depends on it.


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