PGW bond rating improves

Philadelphia Gas Works is no longer flirting with junk-bond status.

Standard & Poor's Rating Services has upgraded its assessment of PGW's debt, the latest signal of stability at the city-owned gas utility.

The rating agency on Tuesday upgraded PGW based on the utility's improved collections record, its "strong management team," and a "credit-supportive rate structure."

The upgrade comes on the heels of the Pennsylvania Public Utility Commission's granting of a 2.7 percent rate increase. The increase was less than PGW requested, but it made a $60 million emergency rate increase PGW received in 2008 amid the financial crisis into a permanent increase.

S&P said its improved outlook was based upon PGW's "expectation that it will not need to seek another such increase during the next five years."

S&P assigned a rating of BBB+ to PGW's Ninth Series Gas Works Revenue Bonds to be issued this month and to two outstanding bond issues from 1975 and 1998. It also raised the rating on $7 million in subordinate lien bonds to BBB.

The new ratings represent a two-grade increase from the previous BBB-/BB+ ratings. It was the first upgrade in 10 years. PGW Chief Executive Thomas E. Knudsen, who took over the utility in 2002, said the ratings upgrade will reduce PGW's cost of borrowing and will save customers money.