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Breaking News: America’s Next Energy Hub - Philadelphia Dealt a Major Setback
In 2012, the city of Philadelphia announced plans to privatize the Philadelphia Gas Works ("PGW"). PGW is the nation’s largest municipality-owned natural gas utility with more than 6,000 miles of gas mains and service pipes supplying approximately 500,000 customers in the city of Philadelphia. The sale was positioned as a means to fix the municipal pension fund as well as the first step in developing Philadelphia as an energy hub, taking advantage of its proximity to the Marcellus and Utica Shale plays as well as its status as a coastal port.  

In May 2014, it was announced that UIL holdings, Connecticut-based gas and electric utility holding company, had agreed to purchase PGW for $1.86 billion.  The notion of a Philadelphia-based energy hub hinged in part on using PGW’s gas cooling and storage facility assets as distribution center for trucks and trains that run on LNG, with privatization driving further private investment in the necessary infrastructure.

However, Philadelphia city council announced its opposition in late October, claiming that the city would net far less from the sale than what was initially projected. Philadelphia Mayor Michael A. Nutter had stated the deal would generate $400 million to $600 million. 
 
After a series of council hearings in mid-November, and with no action by the Philadelphia City Council to introduce an ordinance, UIL has decided to terminate the agreement. "Unfortunately, we had no choice but to terminate our efforts in the City of Philadelphia to acquire the PGW assets," said James P. Torgerson, UIL’s President and Chief Executive Officer. "We are extremely disappointed that no ordinance was introduced to approve the acquisition and we’re equally disappointed that we were not afforded a hearing to present the facts regarding our bid proposal.”  
 
With its central location in the Northeast corridor as well as inexpensive feedstock, Philadelphia is ideally suited to serve as an energy hub. The collapse of the UIL-PGW deal threatens that reality, for now.  Politics aside, good reasons continue to exist for selling PGW and aiding the development of Philadelphia’s role in America’s energy future, and we can hope that the sale of PGW will eventually succeed.

 
Energy Law Ronald W. Schuler
412.325.3302
rschuler@spilmanlaw.com