Our city owned gas utility, PGW, says they need $70M and propose to increase our base rates. Their proposal is being assessed by the Pennsylvania Office of Consumer Advocate (OCA) to see how it represents interests of ratepayers. The OCA will eventually present their findings to the Pennsylvania Public Utility Commission (PA-PUC) for a decision — whether to adopt, reject or modify this proposal.
We learned of this via emails from the Community Legal Services of Philadelphia on May 27th, and since, on their website. The deadline to register to testify was in 2 days, and could only be done by via phone. We found no links to online registration. We verified this by checking the OCA’s Twitter feed, and then several of us registered to speak.
Why the rate increase?
PGW’s filing for the rate increase, back in February 28 of this year, says “the requested cost will help support PGW’s ongoing and proactive Pipeline Improvement Program and operations essential to maintaining a safe, reliable and environmentally responsible natural gas system.”
The same filing also quotes PGW CEO Craig White as saying… “Natural gas is the cleanest, most reliable energy choice to affordably meet Philadelphia’s energy demands.” This already tells us they are unaware of the climate crisis we’re in the midst of.
On the same filing, PGW is aware that they could uncover new sources of revenue; cut costs and increase efficiencies; and raise rates. They even crow about one new source of income — a Public Private Partnership called the Passyunk Energy Center for LNG expansion. This is a project that many groups questioned and even formed an alliance to stop the project from being approved; see the NoLNG page on 350 Philly.
The public hearings
The recent public hearings were held over 2 days, during 4 sessions. Curious, I listened in on all four sessions.
Two judges presided over the hearings, and explained the process at the start of each session. For the record, Judge Marta Guhl led the discussion on the first day, and Judge Darlene Heep took the lead on the second day.
I was surprised to learn about the team of lawyers and staff also present at these hearings. Two lawyers from PGW (Lauren Burge and Sarah Stoner) explained the rate increase. That the utility needs to modernize their system, that since the utility is city-owned with no investors, this is the only way they can raise money. That all revenues generated would go back into safe maintenance of the system. They touted their robust assistance program for low income customers.
Carrie Wright from I&E explained that they try to balance the needs of ratepayers, the needs of the utility, the overall regulations in the commonwealth and work with accountants, engineers and economists, even safety consultants. They were here to listen to us to prepare their testimony to the 5-member Public Utility Commission.
Santos Saparo, Darryl Lawrence & Laura Antonucci from the OCA explained that they represent residential customers; that they filed a formal complaint, and are active participants in this hearing along with a team of 3 attorneys. They plan to submit their findings on June 15th. It turns out that the “Office of Consumer Advocate (OCA) is a state agency that represents the interests of Pennsylvania utility consumers before the Pennsylvania Public Utility Commission (PUC), federal regulatory agencies, and state and federal courts. The OCA is an independent office within the Office of Attorney General.”
Also present were Josie Pickens & Joline Price, attorneys with Community Legal Services of Philadelphia, and representing the Tenant Union Representative Network (TURN) and the Action Alliance of Senior Citizens of Greater Phila (Alliance). Their interest is to see that rates are just & reasonable, with an emphasis on quality of customer service for low income customers, and the problems they may have accessing and affording PGW’s program. They articulated that many were struggling during the current pandemic and social unrest.
All together, 26 people testified for the 500,000 residential customers of this utility. Many represented themselves. Some represented a group, notably — the PHMC, A SMART Collaboration LLC, Philly Thrive, 350 Philly and PennPIRG. Two people spoke, representing the Philadelphia Workers Benefit Council. From the Eastern Service Workers Association (ESWA), four people testified. Also, there was one politician — PA Senator Sharif Street.
No one welcomed the proposed rate hike. Each one made a unique point not covered by others and was a welcome voice. The voices came from all over the city, and seemed to be from all economic levels.
Pandemic, social unrest, equity
Everyone asked why now? Why during a pandemic, with so much social unrest and so many unemployed?
- Unemployment — One recently unemployed person stated “You could try to find the money somewhere else – but not from people like me. When I was working, my income wasn’t going up, but PGW’s rates going up. Now, find the money elsewhere!” Another said they were recently unemployed, and balancing food, medication, transportation costs. Now with looting at nearby pharmacy, there’s an added burden because they’re forced to pay more for transportation. This is not the time to increase a fixed monthly cost, when the economic picture is at its lowest. It’s like trying to get blood from a stone. At this, Judge Guhl sounded sympathetic.
- Poverty — Some said wintertime monthly bills were “$400-$500, which is difficult, even with a sweater and blazer.” Others quoted statistics such as 26% of Philly residents live below the poverty line. Poverty results in poor health, poor educational performance, and increased crime rate. These people are the “canaries in the coal mine” due to ill conceived policies. And that 7,300 households had service terminated in 2019, and started the winter with no heat. Nurses are concerned about children’s development issues stemming from chronic stress and increased mental distress when a home doesn’t have heat or hot water; especially when a child is separated from the family because of gas shutoff.
- Sharing the burden — It was suggested that “the economic pain needs to be shared not just with the consumers but also suppliers, also creditors. We’re in epoch-changing times. Consider sharing a burden rather than picking on the most vulnerable.” Related, another person pointed out that “Philadelphia Gas Works (PGW) bondholders brought in $44 million in 2018 in interest payments that is pure profit. JP Morgan Chase, the bank that manages PGW᾿s bonds, posted $9.7 billion in profits in 2019. Why can’t the PUC put out a call to Vanguard and Blackrock and JP Morgan Chase and ask them to donate some of those interest payments for “pipe replacement” given the hard times that the rate payers are going through?” Another stated that … “PGW should tighten their belt like the rest of us are doing.” And that it is “short sighted to extract revenue from consumers instead of requesting thru federal or state programs.” More than one person asked that PGW operate in the “interest of ratepayers not bond holders.”
- Only PGW — I learned that PGW was the only utility that didn’t reconnect services during this pandemic, and that Philadelphians pay a higher gas rate than anywhere else in the state.
- Climate Crisis — What PGW omits to account for is the climate crisis. This is the elephant in the room that PGW has ignored for far too long. It is due to the climate crisis that customers are investing in retrofitting their homes and replacing appliances with more efficient (and electric) ones — and finding that the homes are more comfortable, energy bills are reduced, and yes, they end up using less gas. It is due to the climate crisis that the weather has been warmer, and thus, customers have been using less gas.
- Pandemic — Some said the “rate hike would hit especially lower wage jobs with no work from home options.” Someone was “appalled that PGW, owned by the city, with a complete monopoly, has the gall to ask for more money, especially now.” One voice cautioned…”People are used to paperwork, but are at an all time low level for patience with paperwork – this is not the time, not the climate, people not getting the support they need in their lives right now.” That “this is a glaring and dangerous error.”
There were varied policy ideas. Some focused on the needs of low income customers, on frugal and/or climate-conscious customers, and others on electrification and transitioning away from gas.
- Shutoffs — There were demands for a moratorium on utility shutoffs, meaning no one loses service for not keeping up with a bill. There was a mention that once a customer’s gas service was cut off, reconnection fees were as much as what was owed; that the balance due kept accumulating;
- CRP — Some asked to look at bills when reviewing the Customer Responsibility Program (CRP), since in their experience, the overall amount a customer owed never goes down.
- Bill capping — There was a request to cap bills for customers whose income is less than 300% of the federal poverty line. Right now, only people whose income is less than 150% of the federal poverty are eligible.
- Debt forgiveness — Some asked for debt forgiveness for lost income during pandemic.
- Clean energy for all — There were references to the United Nations Sustainable Development Goal 7 to ensure access to affordable, reliable, sustainable and modern energy for all. I learned that heating even a small house with gas can be $400 – $600 a month during the winter months.
- Rate hike — PGW is proposing a 40% increase in the fixed monthly charge, as well as an increase in the rate that is charged for each unit of gas. This utility was approved a 6.3% increase in 2017, and now seeks an average of 11.2% increase per customer, with a higher increase for those who use less gas. Many asked… Why are people being punished for using less? Focusing on the connection charge instead of usage charges is contrary to public interest. Environmental awareness should be applauded, but instead… is being penalized! People also asked for greater transparency, and more details about what PGW is seeking to do with the rate increase.
- Historic low gas prices — One person was direct, observing that the “price of gas has declined. Gone down by 20% over the past year, 30% over past 5 years. Why an increase when gas price is going the other way? Someone is creaming off money as input costs go down.”
- Longer term planning — Someone observed “that customers should not be penalized for using less gas just because the utility can’t work out their budget.” Another person predicted that “gas usage will decline. Deal with it proactively or continue to poke holes in a sinking ship.” Replacing all cast iron gas mains over 34.6 years was called a “foolhardy goal”; leaving millions of dollars in stranded assets.
- Climate crisis & public health — Another reminded us that, sure, gas is cleaner than coal, but know that methane (basically gas) is 84% more potent than CO2 over a 20 year time frame, and that every aspect of gas production is leaking more than we realize. An 86 year old said we need to move past fossil fuels and into the future for our generations to come – hopefully there will be generations to come. People reminded the audience that we need to accept that gas is a dying industry. One that affects public health during extraction (also known as fracking), during transportation (methane leaks along the way) and during combustion (toxic air inside a house).
- Needed transition — PGW’s primary business model for over 100 years has been to sell “natural gas”. And now, in light of the 2015 Paris Climate Agreement, the 2018 report by the IPCC (Intergovernmental Panel on Climate Change), and per estimates by our Office of Sustainability that PGW’s principal product accounts for 22% of our City’s greenhouse gas emissions, it is time for a new business model for the utility, one that can keep all Philadelphians warm, and retain the current workforce without selling and/or burning gas. PGW needs to transition off gas as soon as possible, and towards using less energy (via conservation and energy efficiency) and renewable energy. PGW has an opportunity to lead the transition, in a way that works for customers and workers alike.
- Losing customers to electrification — Climate-concerned customers have invested in rooftop solar, replaced all gas appliances with electric appliances and finally, have called to have their gas meter removed. As people like this convince others, the customer base left still using PGW’s product will be low income folks.
Alternative solutions to the proposed rate hike were many…
- Leaking gas lines — Yes, leaking gas distribution lines need to be replaced, but they could be done with strategic replacement. Instead of a plan to replace all the distribution pipes, PGW should consider triaging like Boston, who discovered that 30% of pipes were responsible for 50% of lost gas. These are the pipes that need prioritizing. This is what cutting costs and increasing efficiency looks like — by reducing wastage. This was suggested at a Philadelphia City Council hearing in April 2019; documented here: Transforming PGW into a Municipal Utility for the Next Century.
- Weatherizing homes of low-income customers — PGW could reduce what they need to spend subsidizing low-income customers’ bills by investing in repairs and retrofits to these homes. It seems this would mean less gas demand and less revenue for PGW and they have steered away from this in the past.
- Different business model & heating without gas — PGW simply can’t build more fossil fuel infrastructure for 34 more years if we want a livable planet. Also, gas isn’t the only way to heat homes. Many customers are asking for a participatory study about this, demanding net zero heat by 2030. Suggestions for PGW’s new business model were —- integrated microgrids, rooftop solar, and a way to better serve the energy needs of their customers. The articulate audience suggested the utility begin imagining retrofitting our leaking buildings, replacing gas boilers and furnaces with electric heat pumps, basically, electrifying everything. The public asks the PUC to urge PGW to make this commitment.
- No new gas hookups — Contrary to PGW’s current business model, but necessary, is something we could learn from Berkeley California, Brookline Massachusetts and others who have banned gas hookups for new buildings.
- Public involvement — The transition away from gas could be more productive if PGW embraces public involvement, who ask for transparency and accountability.
THIS is the conversation we need to have.
- Accounting of last year’s explosion — Two people remembered last year’s explosion in South Philadelphia that killed two people, and that PGW has yet to offer a full accounting for what caused the explosion and how additional revenue will make us safer.
- Lack of publicity — One person brought up the lack of publicity for these hearings, having seen the invite a few days ago; the required phone registration was reported to be a barrier to participation. We were told both PGW and the PUC had pushed the announcement to 4 newspapers and onto social media 2 weeks in advance. So we went looking… On Facebook, we found 2 posts by Office of Consumer Advocate (on May 26th and May 28th) and 1 post by PGW (on May 28th). The OCA had 2 tweets on the subject (on May 27th and May 26th); and 4 tweets by PGW (on May 28th, May 27th, May 20th and May 19th). Two weeks prior to the sign-up deadline of May 29th would have been May 15th.
There was an ask that both PGW and the PUC work with us, not against us. That PGW is going to have a serious problem on their hands; that they don’t want this on their conscience. Enough is enough.
What’s next? The Timeline
Well, PGW filed for the rate increase on Feb 28th, expecting the increase to be effective as of April 28th. However, on April 16th, the PA Public Utility Commission suspended the rate increase until November 28th, and started planning for these hearings and the ensuing recommendations. There was a pre-hearing conference on May 5th when the attorneys worked out a schedule.
Now, the I&E and OCA teams write up their recommendations by mid-June, allowing for additional testimonies on July 28th – 30th. Follow-on briefs would be due between August 19th and 31st, with a decision by the PUC in early October. This is when we would know if this rate increase will be adopted, rejected or modified.
For now, PGW has accepted that they will need to wait until December 4th. So, stay tuned!
- May 29, 2020 — Climate Action Philly — PGW wants to raise your gas bill during a pandemic
- May 22, 2020 — CLS Phila — PGW Wants To Raise Your Gas Bill During A Pandemic. Here’s What You Can Do.
- April 16, 2020 — Philadelphia Inquirer -– PGW wants an 11% rate hike as gas consumption falls
- March 2020 — US Bureau of Labor Statistics — Unemployment in the Philadelphia Area by Counties
- The PGW Rate Case Filings at Rates | PGW provide useful information about PGW, although it’s buried in lots of detail.
- PGW 2019 Financial Report
- May 30, 2019 — 350 Philly — Transforming PGW into a municipal utility for the next century
- April 12, 2019 — Philly Talks Climate — The future of PGW — a Just transition beyond selling more fracked gas