DN Editorial: Step on the gas

COUNCIL this fall is expected to begin deliberations on the sale of the Philadelphia Gas Works for $1.86 billion to UIL Holdings Corp., a Connecticut-based utility.

We say the sooner the better.

Summer was the original deadline for the sale, which was negotiated by the Nutter administration, but Council wanted to hire a consultant to vet the deal, so it delayed hearings and a vote until that report was done. But Council recessed for the summer without scheduling hearings.

Part of the reason for hiring a consultant was to make sure that the city got the best deal possible. We believe that the consultant's report will verify that it is. The city-owned utility had a number of bidders, and the Nutter administration has picked the best of the lot.

Part of the reason for the delay, though, seems to be to give opponents of a sale the time and ammunition to oppose it. The PGW unions are against the sale, as is Councilwoman Marian Tasco, who chairs the Philadelphia Gas Commission.

The anti-sale argument, as it is being formulated, seems to be this: Admittedly, the price offered by UIL is a good one, but with the boom in natural gas the utility could be worth more in the years to come, especially if Philadelphia develops as a center to receive gas from the Marcellus Shale fields and resell or ship it elsewhere.

Other arguments against the sale focus on the fate of the unionized workforce, as well as the fate of the city's low-income customers if the utility is privately owned.

In the coming weeks, as opponents offer a cloud of rhetoric to argue against the sale, it will be important to keep these fundamentals in mind:

PGW is a utility with aging equipment and gas lines. It is saddled with a high debt. There is no guarantee that, going forward, it will remain profitable. The utility currently contributes $18 million a year to the city budget, but in the past it has had to suspend those payments and even seek city subsidies to keep it afloat. Better to hand over its debts and the costly job of upgrading the system to an investor-owned utility.

While there may be a potential for higher revenue due to the natural-gas boom, that is still off in the future. To take advantage of it will require the utility to raise capital and take risks - two things best left to private companies, not municipal governments.

And let's not forget the main impetus behind the PGW sale: It will provide a onetime windfall of between $420 million and $630 million that will be invested in the city's retirement system, which covers 64,000 past and present city employees.

The fund that generates the money for those pension checks has a huge long-term deficit - it currently stands at $5.3 billion - that must be reduced. The only way to do that, in addition to money earned on the fund's investments, is through increased contributions from the city and its employees. We are talking hundreds of millions in additional dollars that will have to be diverted from city programs and agencies into the fund.

The proceeds of the PGW sale will give the pension fund a large shot of capital, which will earn interest and grow over the years. With the PGW money, the fund is projected to be stabilized by 2028.

Let's not lose site of the compelling reasons to sell PGW as it advances in Council. At stake is not only the future of the utility, but also future pension payments to the city's work force.

Why wait any longer?