PGW DOESN'T always have to be on the edge of disaster. With a little help in the next few months, the utility can be financially sound for a decade or more.
On Sept. 30, the Public Utility Commission awarded PGW a $25 million increase in its base charge. The company made that filing reluctantly and only after two things had been accomplished: Customers were paying their bills and costs were being controlled.
The $25 million isn't what PGW thinks the law requires, and the decision has been appealed to Commonwealth Court, but for starters the utility has $25 million to begin to pay down the debt incurred to keep our system safe. Because expenses and debt continue to rise, PGW has looked for alternatives to the rates not granted. Four items will make all the difference.
First, management is constantly trying to find ways to deliver gas more cost-effectively. A recent report has identified potential annual savings of $30 million-$35 million. But the company must spend $20 million on computer changes and expert advice to realize that benefit.
Second, a recent change in tax law allows municipal utilities to finance the purchase of natural gas at a substantial discount for years into the future. We'd like to share that annual discount of $6 million-$8 million with customers and use some on our infrastructure, saving more money.
Third, PGW has $10 million in profits from selling gas to other utilities. We are required to pass these profits on to customers immediately. We'd like to also invest these funds in infrastructure so we can save money by not having to raise more debt.
Last, customers now pay to repair and replace pipes under the streets with expensive borrowed funds. A proposal was recently introduced in the state legislature that would allow the recovery of these expenditures at a lower cost to customers than we can provide now. The effect would be to give PGW access annually to $35 million for investment while paying back those funds over time. Once it's approved in Harrisburg, City Council must approve the local financing structure that would save customers millions of dollars each year.
When PGW realizes the benefits of these changes, the company will file to reduce rates. To be strong, however, we need a little help from our friends. To the legislature and City Council, please approve infrastructure financing. To the PUC, please approve our investing in infrastructure both the discount amounts from gas purchases and profits from sales to other utilities. To the Gas Commission, please approve our business-transformation plan.
With these changes, PGW not only moves away from the edge of disaster but becomes the financially sound asset the city and our customers need it to be. *
Thomas Knudsen is the CEO of PGW.