Committee Hearing, February 8, 2001

It really calls for continued attention by City Council and by the Mayor. In conclusion, the City cannot afford to sell PGW. It is an invaluable asset of the City of Philadelphia which if properly managed has real potential to assist this City in furthering 100 RESOLUTION NO. 000773 municipal, economic development goals and legitimate social priorities. It is a gross oversimplification to portray the issue of sale as one of governmental control versus free enterprise. After sale PGW will still have a monopoly on distribution services in Philadelphia and its rates will be set not by market forces, but by the Pennsylvania Public Utility Commission. I think it's gross oversimplification to suggest that the sale of PGW will free the company and its ratepayers from the economic burdens associated with government-run enterprises. In fact, sale of PGW will mean that PGW customers will indirectly pay more in state and federal taxes than they pay now. I think it's a gross oversimplification to suggest that sale will result in significant reductions in discounts and consumer protections and provided to low-income customers for the reasons that I think I've elaborated on enough. That's going to be carried on most likely by the PUC. And I want to point, by the way, that the Winter Moratorium, for instance which is always pointed to as somehow a uniquely Philadelphia 101 RESOLUTION NO. 000773 phenomenon and something which is contained with the Chapter 56, the regulations which govern throughout the State of Pennsylvania. No utility with the commission of its regulatory body can shut off a heating customer between the between December 1st and April 1st. And in the same way, utilities everywhere have systems of medical certifications for people who are facing the shut off of service. All those social protections are going to be here regardless of whether PGW is municipally-owned or not municipally-owned. Finally, again, I think it's important that we have this hearing. Once we've recognized the value of PGW for all Philadelphians, we can focus on the immediate steps needed to be taken in or to refurbish PGW. If we learn from past mistakes, we will recognize that the burdens created by PGW's present condition must be truly shared by the Mayor, City Council, management and labor at PGW and should not be pushed off on already overburdened and frustrated residential ratepayers. So I thank you for giving me the opportunity to present this testimony. I'll be glad to answer any questions. 102 RESOLUTION NO. 000773

Thank you very much. There are just a few issues I'd like to clarify and maybe get some insight from you. You indicated in your testimony on that PGW has terminated service to over 25,000 customers between May and October last year. Do you know whether or not in all those instances there was actually a resident living in the dwelling or the service was terminated? I'm just trying to figure out whether or not these were people actively living 25,000 different houses or does this also include shutoffs at vacate properties, shutoffs at, you know people aren't living in the property or the property is dilapidated and they shut it off for safety reasons. How many of those 25,000 are actually flesh and blood human beings living in a property?

Well, the source of that information was a statement which was submitted in the PUC proceedings. It was in the context of information abut collection activity. I assumed that those were current -- those were active customers, it wasn't just discontinuing service to an abandoned property where gas service had been provided and people had moved away. That could be 103 RESOLUTION NO. 000773 further clarified by PGW. I think PGW would clarify a question if you ask them the question.

I'd like to ask them that today, but I'll ask them that, I guess, by letter. I agree with your assertion on that you made a statement that you were going to say some that will never be repeated enough. And I want you to understand that I don't think there's a lack of sensitivity. I know there's not a lack of sensitivity on my part to individuals in our City that don't have the ability to pay, that are disabled, that are elderly, that are poor, that are alone. And I think we can find the capacity in our hearts to truly take care of those people in just about any circumstance, and I think that in many ways we do. I guess the other side of that issue, having said that have already, is that it doesn't come free. Charity is charity and it's altruistic and it's good, but it's not free. A family of four or five making 50,000 a year certainly are not in the dire straights that that elderly, disabled, or indigent person is, but they're struggling, too. And they're paying tuitions and they're paying their 104 RESOLUTION NO. 000773 auto insurance, unlike 50,000 drivers in the City who don't pay thier auto insurance, they're paying their gas bills, they're paying their water bills and they're trying to make their way in the world like everyone else. And I think what happens in many ways, this social mission that PGW has adopted over the years, however fine it is, and I think it should be maintained as best we can, does impact on the wherewithal of people who are making 45, 50, raising three or four kids to stay in the City. It's similar to the situation that I mentioned on auto insurance. People tell me I must be a dope to pay my auto insurance because there's people flying around the City without it. My rates are a thousand dollars more than they are in the suburbs -- not me this is the anecdotal information. Somebody carries that burden. What I am fearful of is that as we lose population, as we lose customers, there's less and less people available to carry that burden and, therefore, a larger impact on their particular bottom line and potentially another, as I call it, brick on the load for deciding whether or not they want to remain within the confines of the City of Philadelphia. So I'm not making a qualitative 105 RESOLUTION NO. 000773 argument that one is more important than the other. But it is an important aspect of what we deal with in attempting to keep this City vibrant and a decent place to live and raise families. So I'm discounting at all what your position is and I happen to agree with it. I just think that there's another side of that which require people to pay for that particular charitable desire.

I understand what you're saying and I think it's really important. I think a lot about the people that are just above, say, 150 percent of poverty who don't have the benefit of the CRP program, for instance, and yet I really hurt by increases in gas rates whether it be due to increase in natural gas costs or increase in base rates. I do think we have to step back a little bit further and say, you know, here we a municipal utility that should be able to provide service to people here pretty much as in other cities. And yet we have essentially 50 to 70 million, if my estimates are correct, we have about 50 to 70 million more to play than a City which served by an investor-owned utility. That 50 to 70 million is like a cushion. And it can go to serve a number of 106 RESOLUTION NO. 000773 different social purposes. To my mind, when we're looking at a utility which has performed so inadequately in so many areas, I'm concerned sometime when it's easy for people to say, well, we have to get rid of these social programs and we really have to cut back on them. That's first focus. And to my mind, that really should be the last place that we look. We really should be looking first to, do we have an efficient management? Do we have -- are we getting competent management? Are we getting the productivity that we've paid for in rates? And only after you've answered all those questions, then you say, well, can you really afford sorts of discounts? And that's a policy debate which is a legitimate and it's a matter of the resources of this community and I'd like to see that debate richen and go forward. But I resist to some degree anyone who first wants to focus on the social programs. I say let's recognize that those help a lot of people who are very needy and let's recognize that there are some other things that we can do first which may go along way toward righting refurbishing this utility.

And I think that I 107 RESOLUTION NO. 000773 do agree with you. That 50 to 70 million dollar arguable cushion in past years has not been used to improve the service levels to indigent and poor and elderly people and middle class families. A lot of resources of PGW has gone the social service programs of high-powered law firms and consultants and other people who have been politically active through the course of the last or 30 years. 10 So, I main, I absolutely agree with you. 11 The question that I have as it relates to this 12 utility and its political involvement and political 13 running, there is the ability but is there the will? 14 And then I think is the real question here. While I 15 don't think that private investor-owned companies is 16 a panacea for anything. I do believe in many ways 17 it takes it out of the hands of political 18 considerations as it relates to the operation of the 19 company. And that's what I'm worried about in this 20 effort to stabilize, to right the ship, to fix it. 21 Not that anyone's intentions are bad or that anyone 22 is evilly intended, but the pure nature of politics 23 is such that it makes us make decisions sometimes 24 that in the private sector or outside of politics we 25 wouldn't normally make. And I think that is 108 RESOLUTION NO. 000773 philosophical concern that I have is that are we capable, and I'm pointing to myself too, are we capable of really fixing it? Do we have the political will to do? And if we don't, it ought to be taken off our hands.

Well, that's the challenge, Councilman Kenney, that I pose to you as a political insider. I'm on the outside. And what I would say is that for the citizens of Philadelphia, that's the real challenge of leadership. And you and your colleagues have a wonderful opportunity to show that you're able to recognize -- and perhaps the present crisis helps us to focus better, to recognize that PGW has to be treated as an asset and it has to be protected as an asset and that to some degree some of the normal aspects of politics just cannot be allowed to infiltrate or have to be sort of banished from that particular area because this is area which is providing an absolutely fundamental service, fundamental necessity of life to the citizens of Philadelphia.

I've been in elected office 9 years, I've been involved in politics more 109 RESOLUTION NO. 000773 than 20, and the thing that I worry about is maybe I'm too jaded to think that it's possible and would rather try to find another way to do it. Let me ask you a question about the issue about the senior discount. It is a percent 7 discount and it is given regardless of income. Do 8 you have an opinion about the efficacy of that? I 9 mean, thankfully in our society or in our City we 10 have senior citizens that have invested well, worked 11 hard, earned a pension and can take care of 12 themselves. We also are of senior citizens that are 13 on the other end of that scale and absolutely need 14 our help. Is there some level, politics aside, 15 that's really morally fair or not fair for someone 16 to be getting 20 percent discount on their gas 17 rates? I know in our political decision we'll 18 eventually have to deal with it. 19

Suppose you just say, 20 well, any senior citizen with an income of over $50,000 a year shouldn't get the discount. The problem with that is you'd probably say, well, it's still too costly. So then we go to the next question; well, what about the senior citizens discount in general. 110 RESOLUTION NO. 000773 My main position has been for all social programs is that, first of all, you have to begin with good information. We don't know, for instance, how many senior citizens if they didn't get the senior citizen discount would be eligible for CRP.

I've asked for that information for the last five years. You can't get it.

And in some ways, one of the most unfortunate things about this computer debacle that we've experienced is that we thought that by now we would be in a position with the BCCS system to have PGW able to generate much more precise information about profiles of its customer base and be able to give us information which would make it possible to look and understand truly what the effects would be of a particular action. So my first step has been to say, well, don't do anything without good information. Do everything to try to get the company to a position where it has that information so that when Council makes a decision, it's not based simply upon speculation. And at that point, there are concerns that I have particularly with the senior citizens 111 RESOLUTION NO. 000773 discount which is that I know that seniors by and large especially in Philadelphia stay in the house, they're inside, they don't get out very much. And we know that most public benefit programs, only about 50 percent of the people that are eligible ever apply. As soon as you make senior citizens have to go through a means testing process, you will know that there are going to be senior citizens out there that should be getting the senior citizens that will not get it. Partly because more than any group in the population, they are less likely to depart from established habits of behavior. Now, that's something that we say and I'd like to see that explored a little bit more. I'd like to see more expert testimony on that. I'd like to see more concrete kinds of facts presented to support what I have as a theory but which I'm not ready to present to you as absolute fact.

Also, are you familiar with any CRP programs, privately run investor owned utilities? Does PECO have, for example, a CRP program?

PECO has something called the Customer Assistant Program. 112 RESOLUTION NO. 000773

How is it different from PGW's.

It's different in -- the structure is different. Throughout the State of Pennsylvania, there are some general guidelines established by the PUC for customer assistance programs and you have to comply with those guidelines, but within those guidelines different utilities have different kinds of systems. PECO's system is one in which people that are, I think, between 150 and 100 percent of poverty get a discount of percent on the first 14 500 kilowatt hours. The first 500 kilowatt hours 15 really isn't quite the average usage of a household 16 of four, so it's really too low. 17

Household of four? 18

A family of four. A 19 household with four people in it. 20

Are you talking about 21 seniors or just people -- 22

I thought you were 23 talking now about -- 24

I'm sorry. 25

I was getting back to -- 113 RESOLUTION NO. 000773 we left senior citizens and we were just talking about the analog of the CRP program from PGW low-income customers is PECO's Customer Assistance Program or CAP program. It has two parts. If you're between 100 and 150 percent of poverty, then you get a percent discount on the first 500 8 kilowatts. It's a little bit below what an average 9 family of four would use. If you are 100 percent of 10 poverty or less, then you get a 50 percent discount. 11 We believe that the 50 percent discount is not a bad 12 discount for the people between 100 percent poverty 13 and 50 of poverty, but for the very poor that's 14 really just totally inadequate. It doesn't help 15 them -- it helps them, but it doesn't help them 16 sufficiently to afford electric service. 17 PECO is currently under a mandate from 18 the PUC to investigate more fully the adequacies of 19 its CAP program for those very low-income people. 20 The cost of that program right now for PECO has in 21 rates about $50 million a year. That's in their -- 22 you're asking, well, does that come out of base 23 rates? I'm talking about an electric utility here, 24 not the gas utility. But it's not really -- the $50 25 million is in base rates, but what's anticipated in 114 RESOLUTION NO. 000773 restructuring is that there be a separate, what they call, reconcilable customer assistance which would mean that would be like a surcharge on the bill. All customers would be charged or all residential customers would be charged a certain amount as the so-called universal service surcharge. If PECO collected by that surcharge more than its low-income program's cost then it would be refunded to customers as credit in the subsequent year. That's the way that program operates.

Finally, my understanding of the major raise in the cost of gas this year has to do with the cost of the gas purchase. That as a result of lack of production in the prior year because of the lack of demand; is that how it cyclicly works? You have a warm winter. In winters the producers of natural gas start cranking down their operation. All of a sudden now we have a cold winter. The supplies aren't there. The quantity is down, the demand is up, therefore, the price skyrockets?

I think you've touched at least on one element which is after two or three warmer than normal winters with gas prices 115 RESOLUTION NO. 000773 relatively low, there was less incentive on the part of producers to drill for more, and as a result supplies go down. And then when you have an increased demand then you have what you would expect the price going up. But I think there are a lot of other factors, the national economy. You simply can't ignore the fact that the price of oil is going up. Oil competes with gas. As oil goes up, the gas people say, hey, this is chance. We can still compete and we just follow oil as it goes up and we're still sitting pretty and we're making more.

Now, a forecast would indicate that maybe next year is going to be as cold a winter it was this year. In the course of this spring and summer, fall, the gas producers start, I would assume because the demand is up, start generating more production and more supply of gas. Therefore, it would seem likely that in an additional cold winter, the cost of gas would go down and that rate that we pay for the cost of gas would also go down.

That's right, and that's the way it traditionally has, although I would expect that next year it's going to go down very 116 RESOLUTION NO. 000773 significantly because this year, remember, we're using a lot of gas that was bought at prices well below what we currently have to pay for it. And we'll be buying for next year in this year's market at prices which are going to be really reflect this run-up in gas prices.

So we'll still have another bump perhaps or at least less of a reduction. But if we experience theoretically three cold winters in a row, by the second winter we'll be back to some normalcy?

Well, you and I may know about the same. We read the New York Times and maybe the Wall Street Journal and we have some general views, but you need to talk to an economist more about all the factors which play. There's one thing I would want to say about gas cost which I think is something that's not understood very well in Philadelphia at all by most people. And that is, natural gas is truly a pass-through by PGW. I compare it to the situation where you go to a garage and you buy a carburetor and you pay the garage for the cost of the carburetor, you pay also a markup on a carburetor 117 RESOLUTION NO. 000773 and then you pay the garage to put the carburetor in your car. It's not the same with PGW and natural gas. What PGW charges you is only what it bills -- only what it pays for natural gas. It's not marking up any kind of profit. It's not making any money on the natural gas itself. You say, well, then why is my bill more per MCF than what PGW pays for it? Well, the difference between the price that PGW pays per MCF and your bill is the add-on cost of maintaining that whole system of pipes, billing, metering, you know, all of the costs of maintaining the system. But they're not making money on the gas itself. They're not acting as a middleman for the gas. And I think that's important for people to understand. The real problem here is, again, to say we need a national energy policy. We need more involvement by both state and federal government in terms of dealing with the issues of customer assistance, the LIEAP program, for instance. We need a state equivalent of the LIEAP program. That's Low Income Energy Assistance, cash assistance, perhaps increasing the levels above that 150 to 200 percent of poverty would be good. When you're talking about utilities, 118 RESOLUTION NO. 000773 you're always talking about millions and of dollars. You're never talking about small change.

Thank you very much. Councilman Rizzo.

Thank you, Mr. Chairman. I have to make this comment that when we look at the senior citizens discount at the same time we look at the fact that our senior citizens pay real estate taxes that fund the school district. Most of those senior citizens don't have any kids in that system. So I would hope on the same track that we would look at that before we start tinkering with something that could affect their lives.

I think the point is well taken. It's part of that whole policy debate. I don't think this is a simple thing. That's my main point, because it's not a simple issue and this is an issue which would really challenge City Council. And I hope that it's going to be based on the development of really good information and a broad base kind of information of the sort that --

As soon as we get that computer system straightened out, we'll have 119 RESOLUTION NO. 000773 all that information available at our fingertips. Thank you very much for your testimony. Mr. Frank Redding. I'm sorry, Councilmember Cohen.

I agreed with everything said until the very end when you said it's not a simple matter. I happen to think it's a very simple matter. I think that what is happening in one area is that those who have always been against an municipally-owned utility for whatever reason they may have are now seizing upon the troubles of PGW, however they were caused, to push the concept of sale of the utility. I think those have us felt that the government has a responsibility for the welfare of its citizens, not only the welfare of the business segment of the City of Philadelphia, but the people who live in the City, I think that those of us feel that the government would be advocating it's, what I regard, is its really major obligation and that is to be responsible for the lives of those who live within the boundaries of the City of Philadelphia. That's what we're talking about. Those who advocate the sale have always 120 RESOLUTION NO. 000773 felt that the real problem is the senior citizen discount and perhaps that special discount for low income citizens. Often they were also against the shutoff because they thought that would interfere with bill collection. And so to me, it's a simple thing. The City has a responsibility, not only for the bookkeeping of its budget, but for the lives of its citizens. And gradually over the last or 30 11 years there has been a movement in the direction 12 that go back to the Middle Ages: Every citizen 13 fends for himself, the government's responsibility 14 is only the most elemental one, that of cleaning the 15 streets, furnishing police and fire protection. And 16 I reject that. To me it's simple. We got to make 17 PGW work. I agree with you when you called it, I 18 believe a treasurer or a gem of the City government. 19 I believe that's the case. I think we've got to 20 make it work. And when we look at it, the real problem that I see financially more than any other matter is that PGW has been looted by the City government for $18 million a year, year after year. If, say, for the last 10 years the City government had not done it, there would be a pool of $180 121 RESOLUTION NO. 000773 million which largely would be sufficient to deal with the existing problems that we have. So to me, the final answer is simple. Maybe adjusting the right knobs, finding the right keys to push may be complex, but the simple question is the responsibility of the City. And I believe and I'm as dead set against getting rid of PGW as I am the conversion of City Hall into some private industrial business. I think these belong to the people of Philadelphia and I am strongly opposed to any solutions except the good solutions. PGW is not alone historically. And I guess Councilwoman Verna and I and maybe Councilman Longstreth would be the only ones who know that historically and covering at least the last 35 years, there have been three agencies that were always at bottom of the list of the City. That may refer to the question of political will that Councilman Kenney referred to. The schools, nobody in City government wanted any responsibility. They said, Don't bother us, we won't bother you. We'll not bother with looking at the conditions of the schools. The Philadelphia housing authority and the Gas Works. Those three agencies largely serve, and 122 RESOLUTION NO. 000773 this I agree with Councilman Kenney, serve the political purposes of whichever party or whichever branch of whatever party was in power. It served the patronage needs. Apparently, the reform movement with the Home Rule Charter that established a strong civil service, limited patronage. Other ways were found. We developed this concept of authorities and separate operations which then freed the City which ran all these separate agencies, but it freed them from the restrictions on patronage deals. But the Gas Works, we never looked at it back in 1968 when I first joined the City Council. Nobody was interested in anything except is that $18 million going to be there.

"PGW, you give us that money, you can run your own show. PHA, don't ask us for a penny. You can do whatever you want. " And the same thing with the school system. As long as we satisfied the coal miners up in Scranton, Anderson, you know, the historic legendary figure who ran the schools' finances was 123 RESOLUTION NO. 000773 satisfied, you then got the votes of the representatives of the coal areas for state share of the school budget. I think you're right on political will and I think it's our responsibility to develop that political will. Any that don't have that will are choosing not to have it. We could have it. We have the power. And when we go out to campaign, we tell everybody we have power, we tell everybody we're going to exercise it in the public interest, and then we get into office and we come to grips with the realities of public life and things happen. I think this needs a lot of study. I think it's good we're talking about it, though I think that putting this matter before the City Council serves both a good and a bad purpose. It serves the bad purpose of vindicating that there is a general view of selling the Gas Works because most of us in public life have not uttered any criticism of the Mayor's statement advocating the sale. Maybe this the first voice speaking out loudly against it. I'm against the sale. I will fight it with every vestige of whatever I can find to fight it with. I think it's 124 RESOLUTION NO. 000773 a bad idea because I think its motivation is not a good motivation. The motivation is bad because it wants to eliminate in any way it can or weakened the senior citizen, the low-income discount and I think we have an obligation as a government to provide those purposes. And so I think you're right in trying to get the facts. Incidentally, Councilman Kenney, if I may just discuss one other item, and that is the senior citizen discount. Every study I know of shows that if you demand income information from senior citizens, you cut down enormously the percentages of senior citizens who are willing to apply. Senior citizens, it will happen to all of you and I can tell you the alternative is worse if it doesn't happen to you. Will get older. And in the process of aging, every study shows that overwhelmingly senior citizens become less secure in their feeling and they don't want the government prying into their activities or they're fearful that somebody's going to charge them with doing the wrong thing. Whenever you apply a means test, you cut down enormously the aid to the poorest of citizens. My personal guess is -- don't you have to apply to 125 RESOLUTION NO. 000773 get the senior citizen discount?

Yes, you do.

I would think that when the studies are finally made, if there's any way of getting it, you will find very few affluent people who apply who take the positive step of saying, Give me that senior citizen discount." And that is to my understanding as to why senior citizens organizations all over the country opposed so-called means testing. On the surface it seems fair to say -- and you know, he's no longer among us so he won't be concerned, but maybe his relatives were. We had used to say you should Freddie Mann, get a percent discount for gas. He was the 16 favorite pan whipping boy in this situation. 17 Obviously, on the surface it seems wrong 18 and the 50,000-a-year folks that Councilman Kenny 19 talks about are hurt by that kind, but I'll bet 20 there is very little dipping of that kind by affluent citizens. The PGW has records. I don't know whether they could be made available or not, but I would like to see such a study because I think that that theory that we're letting rich people get away 126 RESOLUTION NO. 000773 with a lot, it just sounds like President Bush talking about his tax plan, you know, that where the great bulk of the tax increase, the dollars, the actual dollars and only a small portion will come to the less affluent. So I congratulate you for your analysis here in general and I congratulate Councilman Kenney on probably raising it from the positive point of view, and maybe I am critical of him for raising it to the extent it represents the negative point of view. But I think it requires a lot of attention and study and I'm listening intently to everybody's point of view, but from whatever I hear as of now, this voice is going to be loud, probably strident, probably confrontational, probably everything because I think the problems that senior citizens face in Philadelphia economically is a very desperate situation. And just the threat that this senior citizen discount or low-income discount may be revised downward is a terrible thing to force upon senior citizens. Thank you. I thought it was going to start with a question, but I couldn't resist, Councilman Kenney. Forgive me for that statement. But I think your analysis is excellent. 127 RESOLUTION NO. 000773 And I understand the other analysis and there ought to be a to be a broad and I hope everybody knows that out in the hinterlands, I don't think there's very much support for the concept of sale of the Gas Works. I think it's all of these upper echelon groups that have always wanted the sale of the Gas Works that are advocating it today. Thank you, Mr. Chairman.

Thank you Councilman Cohen. (Applause.)

Thank you very much Mr. Bertocci. I appreciate your testimony. Mr. Frank Redding, would you please come to the table to testify. The stenographer needs a two minimum break. (Brief recess.)

Thank you very much. We're now back in session. I want to apologize the length of the delay. I realize that only one or two people can testify at the time and the testimony has been lengthy through the course of the day, so I appreciate your attendance. Please identify yourself for the record 128 RESOLUTION NO. 000773 and proceed.

My name is Frank Redding, I'm president of the Gas Works Employees Union, Local 686.

Thank you. Please proceed.

Since 1841 until the present, the City has maintain ownership of PGW. Throughout its history. While surviving every recession and economic downturn, including the Great Depression in the 1930s, this City never seriously entertained the sale of the Gas Works. Instead, in the best interest of the citizens of Philadelphia, it was retained to ensure continued safe and reliable service. It also remained the profit center for the City for all of those years. To this very day, members of Local 686 strive to provide a high level of service. It seems almost ironic that at this point in time on the heels of the best economic period our country has ever experienced, that PGW might end up on the auction block. In my following remarks, I hope to convey the reasons why it would not be prudent to sell PGW despite the current and temporary financial hardships our 129 RESOLUTION NO. 000773 company is facing. I would also ask for a moment you disregard PGW's recent difficulties, avoid committing to a sale because it is the easy thing to do or suddenly a popular choice. And instead examine the devastating affect the sale would have on the work force, their families and our fellow citizens. When I say that I represent 1400 members, you must add to that figure their families and dependents which number 10,000 people, all who rely either directly or indirect on PGW as their primary or only source of income. In today's society, one can not ignore the existence of non-traditional extended families and the fact that gainfully employed people also often support grandchildren and/or elderly relatives. In a city such as Philadelphia, where one-third of its citizens are below the federal poverty level, I can assume you that our members routinely assume these obligations. In addition, the sale of PGW would have a devastating impact on all of the people who work ther and would run counter to the City's goals of increasing its tax base and eliminating urban blight. Only by keeping decent paying jobs in 130 RESOLUTION NO. 000773 Philadelphia will its citizens be able to purchase and maintain homes, and financially support vital City services. The sale of PGW would definitely be a step in the wrong direction that would eventually lead to the loss of those jobs despite whatever initial promises are made by any potential buyer. When I speak of the people that I represent, I would like Council to know that the PGW Union work force is one of the most culturally diverse anywhere to be found. Historically, PGW's hiring practices have proportionally reflected the cultural diversity of the City. Especially in the last years with the changing demographics of 15 Philadelphia, PGW has more than met the challenge of equal opportunity in hiring and promotion. Through its policy of non-discrimination and its commitment to fully and fairly represent all of our members, the union has always supported PGW in this goal. Unlike other neighboring utilities that only display diversity in advertisements, PGW's success in diversity hiring is, I believe, a direct result of City ownership. I would challenge any potential buyer to prove that it hires as fairly as PGW has consistently done. 131 RESOLUTION NO. 000773 Nothing is more important than the health and safety of the citizens of Philadelphia. As a large metropolitan community, with older row-home type residential and commercial structures making up most of the dwellings in the City, special consideration should be given to the emergency service work force that PGW has always made sure was available for the safety of its customers. PGW has always provided a committed, safety conscious, efficient and highly skilled work force to provide safety-sensitive duties. Our members turn on and shut off gas, replace old mains and house lines, service and repair customer appliances at costs far below what many independent contractors will charge.

In fact, many older cast iron house heaters, that will virtually never crack, are repaired by PGW. Many other utilities refuse to fix those types of heaters and contractors are all too happy to completely replace them at exorbitant costs. In Philadelphia, with one-third of its population below the federal poverty level, these services ensure that the homes those furnaces heat remain safe and habitable. More important than the economic 132 RESOLUTION NO. 000773 benefits of an adequate serve force to the citizens of Philadelphia is the fact that the same personnel are trained and available to respond to the overwhelming number of gas leaks that PGW's aging cast iron main system suffers. PGW has roughly 3,000 miles of gas main in the City of Philadelphia. Over 50 percent of the system is composed of antiquated, cast iron pipes. , states that this represents the highest percentage of cast iron main in any system in the United States. Therefore, the PGW main system is brittle and prone to breakage. As an example, on a daily basis PGW has a minimum of 700 known gas leaks in the streets of Philadelphia that it does not have time to promptly repair. In the colder weather, the number of such leaks increases dramatically. Understandably, our service forces primarily exist to respond to those leaks in order to protect human life and customer property. Our work force has a unique, vested interest in protecting the lives of Philadelphians. They are our family members, friends and neighbors. You 133 RESOLUTION NO. 000773 won't find this kind of commitment from a private utility and its contract employees. As I have already stated, Philadelphia is unique in this area as to the close proximity of residential dwellings, and it has only been through use of our professionally trained and competent work force that we have kept the number of explosions and other incidents to a minimum. Our other departments such as Transportation, Office and Allied, and Gas Supply also play critical roles in serving the Philadelphia public. Many of the employees in those departments have gas leak emergency experience and are willing and ready to assist if ever needed. No other utility or buyer of PGW will make the same commitment to staffing levels as PGW has done. This is demonstrated by the fact that other local utilities in the Philadelphia area have downsized so dramatically that they no longer have enough employees to cover their own territories. Frequently, when customers of those utilities call for service, they are talking to a person in another state who then refers the work order to a non-utility suburban contractor who has competitively bid for the right to receive that 134 RESOLUTION NO. 000773 referral. Consequently, it is cost, not safety, that is the major determinant of the extent and quality of the service ultimately rendered. This kind of inadequate staffing and the utilization of a private utility's employees or those of a contractor, would inevitably compromise the welfare and safety of the citizens of Philadelphia who live in older homes and do not have the economic resources to upgrade their gas piping and heating systems. And while these practices may be profitable for any privately-owned successor to PGW, they would do nothing to provide jobs for the people who live in Philadelphia. Additionally, some of the potential buyers of PGW that have been publicly mentioned have also demonstrated a strong anti-union bias and have spent millions of dollars to thwart union certification elections. As I have previously stated, Local 686 is partly responsible for PGW's diversity in hiring practices and the preservation of jobs. Any sale to such an anti-union entity, without unconditional recognition of Local 686 and assumption of its contract, would definitely lead to the loss of many jobs impacting many families. 135 RESOLUTION NO.

000773 I would never purport to have the ability to explain the other impediments to the sale of PGW, such as the cost and tax ramifications associated with the conversion of tax-free municipal bonds or any of the other legal complexities associated with the sale of a major City asset. I wouldn't belabor these facts even if I understood them. I have tried to explain the cost in more human terms, such as the loss of jobs to many families, the diminished service to PGW customers, and risks to the safety of the general public inherent in the loss of qualified professional utility workers in a large city such as Philadelphia. However, I would like to mention that natural gas as a commodity has the propensity to also decline in cost. In the 1970s and the '80s, we experienced similar sharp increases in gasoline prices until they eventually leveled off and became more affordable. The economic forces of deregulation of natural gas at the well head coincident with the storage and transportation problems across the country that has led to the recent unprecedented gas cost increases, may only be temporary in nature. At present, we may be seeing 136 RESOLUTION NO. 000773 high tide of the cycle. Additionally, any proposition stating that the sale of PGW will result in lower prices for Philadelphia customers is erroneous. The cost of natural gas has risen comparably for all natural gas companies resulting in higher prices throughout the country. The Public Utility Commission, in its order dated November 22, 2000, Docket No. 3, recognized the potential for falling natural gas prices in the future. Let's not be too hasty to sell a major City asset that has survived the Great Depression, remained a profit center, and served the people of Philadelphia for 160 years. Please remember that our commitment to the safety of our workers and all of Philadelphia's citizens cannot be summarily supplanted by an outside entity which is all too willing to jettison hard-working employees and take shortcuts which compromise safety, simply to save money and increase its own profitability. City Council has always been supportive of the hard working men and women who work at PGW and of organized labor. We look forward to working with Council on this critical issue. 137 RESOLUTION NO. 000773 Thank you, I'll be happy to try to answer any questions.

Thank you very much for your testimony. First, I'd like to make a couple comments. We are examining here today all the possibilities dealing with this utility. It is my position that over the course of last or 30 10 years, people in positions of office like myself and 11 others have used this utility for their own ends., 12 have in many ways taken the opportunities that were 13 presented to them when revenues to the company were 14 much greater than they are now, where issues 15 relative to the shrinking and declining population 16 base and ratepaying base was better than it is 17 today. And I think that in many ways you are 18 suffering from the political, the lack of political 19 will to do things differently. 20 I agree with you, your members, perhaps 21 some of the most efficient and qualified and trained 22 people in this government. They wouldn't allow you 23 to open a street, deal with such a volital commodity 24 as gas, go into people's home and restart their 25 heaters and clean out -- all the things that you 138 RESOLUTION NO. 000773 guys do every day. And I also recognize that you are the first line of complaint when it comes to people complaining. As I said before, if we could get anybody to answer the phone, they could complain to them, but when you go into their house to fix their heater, they're, I'm sure, in your ear telling you about how terrible the bill is and how it's gone up and how bad the service is. And I know it can be a frustrating situation for you on a day-to-day basis, and morale then suffers because of the kind of interaction with citizens on daily basis. Where you and I differ in this situation is that I don't think politicians have the ability or the will to change things substantially. I think they have the desire to keep things pretty much the status quo and will try to maintain the all the perks that political control that entity has. And I just would like your opinion as to what the quality of management has been in that utility in the last five -- how long you been to with the company?

Twenty-six years.

In the last 10 years, what is the quality middle level, upper level been at that place and how frustrated have you been 139 RESOLUTION NO. 000773 in trying to get do things done and to do things differently that you know you need to do?

Well, I don't know if you're aware of it, but I'm just recently elected as of December 1st, and I don't have experience in dealing with management on a firsthand basis as a new official. It's been a short experience for me.

I don't mean as president of the union, I mean as just a person who works every day and has skills and needs to deal with this company on a regular basis. And if I'm putting you in an awkward position, vis-a-vis your employer, I apologize and you don't have to answer. But anecdotally, what I get from your members in their discussion with me is that it is an extremely frustrating situation to see things going on that they know are dead wrong, that they are in the wrong direction of the company, having the inability to change it and still have to suffer the consequences, potential consequences of bankruptcy that is facing this company now? You guys are probably the most efficient and effective people in the company. You're dealing with people who aer sometimes totally incompetent. 140 RESOLUTION NO. 000773

Well, I can say this: I think our people have been looking forward to having permanent long-term management. I think we've been through a sea of changes and we've had different administrations at the top, but I don't think they've actually been given the chance, at least this interim team, to make some of the changes they proposed. From my part, I've done my best to convey to them that the union is there and willing to work with them to try to implement changes. So with respect to how I feel about management in general, I think --

Not particular this particular crew, but those you've seen.

Even in the past, as I said before I had no firsthand dealings with upper management. But I think middle level management, a lot of those people had graduated to those jobs. They came from the ranks of the union. All of those people are hard working, too. I would sit here and criticize them.

I understand. What I want you to understand also that no matter what happens, whether the government has the ability to 141 RESOLUTION NO. 000773 write to company and stabilize it and things better, whether or not they do ultimately entertain a sale, I agree with you that this Council will not permit a sale unless there's some provision for your particular membership that meets your acceptance. We're not going to force anything on you. And let me tell you my motivation in even raising this issue. I'm concerned about he same -- probably not as concerned as you are personally, but I'm not any less concerned as you are with the families and the members that you represent and the families that they're raising. I am fear fearful that this company's in such dire financial straights that at some point in time a person who maybe has spent 10, 12 years as a union member employee of PGW may not see at opportunity retire out that company. And despite the fact that they are hard issues and despite the fact that I can sit here and tell you what I think you might want to hear, that's not going to change the reality of what we're dealing with today and what we have do deal with the over the next six to eight months. And I just want you to know from my personal perspective, I'm as interested in maintaining the quality of life and 142 RESOLUTION NO. 000773 income and dignity that your members desire to retain while at the time ensuring that they're not unemployed. That's just a personal comment from me. We'll examine every potential option. Councilman Rizzo.

As you know and you've heard earlier, I echo those sentiments. Something very interesting that I picked up in your presentation and you have as an example, on a daily basis PGW has a minimum of 700 known gas leaks in the streets of Philadelphia. Fortunately, I have a little background in that. I know that certainly isn't desirable in many case. It's not as dangerous as it sounds. But I want to get a feel for, we know how precious this product is and how expensive it has gotten. Do you think there's any way we can calculate the loss of revenue on 700 known gas leaks minimum. That could be 2,000 in any one time. I'd be interest to know what kind of money we're allowing to escape into the atmosphere. Do you think the company has a feel for what we're squandering there by not fixing these leaks.

I think if they could assess the volume of gas that's actually being lost 143 RESOLUTION NO. 000773 and the cost associated with that. I think they would probably not have the time to repair them. No, I don't think they could determine that. But from a safety perspective, I think they really need to address that at some point in the future. Once we get caught up, I think --

Well, I know we have a representative of PGW here, and I know we have a representative of PGW here. And I'd be interested to know what type of revenue is lost based on th fact that we're not responding to these gas leaks because I remember a story where the water company had a known water main breakage in Fairmount Park and thousands of gallons were cascading -- millions of gallons were cascading on a daily basis into the Wissahickon Creek. The fish didn't know how to react. But I'd be curious to know, and I'm going to ask PGW to let us know what that revenue loss is to the ratepayers.

Some of that may a direct result of the use of capital dollars to conduct the operations of the business over a period of a couple years. And witnesses are correct, the major issue here is safety. When you're using 144 RESOLUTION NO. 000773 capital dollars to run company because you're incompetent and incapable of running the company, the dollars that could be going in to replacing mains aren't going into it.

Mr. Chairman, they were talking about the dangers associated with cast iron gas mains. PECO Energy had a very, very bad situation, as you remember, in West Conshohocken when an entire neighborhood was devastated, just terrible, terrible explosion due to a cast iron pipe that broke. And I think we all come from this industry remember how devastating that was actually the result of a cast iron gas main breaking and I believe that PECO Energy has removed almost all of the cast iron that's in the ground at this point. I know we have a substantial amount of it left here in the City of Philadelphia. Again, thanks for all you do.

Thank you very much. Councilman Cohen.

I think spoke for all members of Council, with respect gas workers, we are proud of the many, many years of their work. Where perhaps we differ is the question of private 145 RESOLUTION NO. 000773 ownership. I find that the complaints that Councilman Kenney enumerated, questions that he has learned about from others about the failings of the Gas Works official. That's repeated constantly in every area of private business. Actually, the worst excesses of the failures of the Gas Works followed the employment by the Gas Works of utility executives were chosen after a national-wide search when it was explained to everybody, finally, we've got real utility executives in and they did apparently what executives do. On the company credit card, they used it for all kinds of purposes. And when that was reported by the District Attorney in the news article, there were many statements made by the utility executives saying, what did they do wrong? That's what we do everywhere. The difference was this was public money, and the private utility executives had never realized that. I don't think there's any one way of being the best way. It depends a lot on the will, on the management, on the training and on the feeling of closest that the people who do the work, Gas Works employees have for the people they're doing the job for. 146 RESOLUTION NO. 000773 So I think if Councilman Kenney's position becomes a position of the union that no 4 sale will be approved unless it has the kind of guarantees for the work force as well for the people of Philadelphia to assure their safety and welfare, I think we're going to have to solve the problem while PGW remains a City utility. Thank you very much.

Thank you, Councilman. I just want to say finally that whatever scenario recovery comes in, whether it's a public sector scenario or a private sector scenario, you're probably the safest employees in the company because you're the most needed. I can't image a private sector scenario under the right negotiating conditions for us to approve it that would allow -- that would not need every member of your compliment to be opening the street, fixing the mains, doing the things that even a company that bought it that didn't do gas traditionally don't have the employees trained to be able to do. So there may be middle management that's at risk, there may be upper level management that's at risk, certainly most of what you represent, of who you represent would be an 147 RESOLUTION NO. 000773 absolute requirement in either scenario. COUNSEL: If I could just add one point, representing utility employees both in public sector and private sector. One would hope that's the case. Unfortunately, that hasn't always been the case recently, at least not in Pennsylvania. In one of the feeders we have, even if there were protections built into the agreement is from our prospective we have to look for wolves in sheep's clothing and a lot of the private utilities have cut essential areas of the work force including field service and distribution areas like that and have, in fact, used private contractors in their stead. So that's of some comfort what you said and we appreciate it, but we'd ask that you consider that and look carefully at it because a lot of what we hear to be the potential suitors of PGW have slashed, cut, and burned and there have been some safety ramifications as a result.

Using your analogy of a wolf in sheep's clothing, I can tell you that the condition at PGW right now is a wolf without a disguise. It is right out there, you know what it is, and it's a real desperate situation. And I am 148 RESOLUTION NO. 000773 seriously concerned about the future of this utility as it relates to being able to employ people as talented and qualified as you are membership. Thank you. Any other questions? Thank you very much. (Witness comes forward.) Please identify yourself for the record.

My name is Ann Rubin. I'm the President Greater Philadelphia Association of Realtors, and because of the hour, you have my testimony and I don't feel I need to read the whole thing. I do want to state publicly that we are in support of the sale. We feel that there's a lot of benefits for the sale. At the least is possibly bringing in revenue that can go towards our school system. Our school system is the greatest problems in selling real estate in Philadelphia. And if we're to improve our school system, I think we'll begin to not hold on to the residents, but we'll be able to see some people possibly returning since we do have good affordable housing. On a personal note, I deal at the settlement table constantly with PGW and PGW issues 149 RESOLUTION NO. 000773 and I'd like to share just one of thousands of stories that have happened last week. I represented a buyer on the purchase of a home in Philadelphia. It was an investment property that a gentleman owned and the gentleman was coming to the table with $11,000, the seller was coming to the table $11,000 in order to make this sale happen. At the table at the Title Clerk we found out that he supposedly owned $2700 in PGW bills. He had called PGW when the last tenant moved out which was about nine months prior and told them that they could discontinue service. The buyer called to put gas in her name and was told that there was no gas service to the property. Upon the pre-settlement inspection that morning, there was in fact gas service to the property. And when we called from the table, PGW still claimed that, No, I'm sorry. There is no gas service to the property and there are back bills of $2700. I won't bore you with the details, but here I was faced with a problem that we potentially would not be able to close this settlement, the buyer having a truck full of stuff that was ready to move in that afternoon because the seller was unaware that there was this $2700 bill and he only had 150 RESOLUTION NO. 000773 $11,000 with him. These problems are constantly there and I hear from the consumers, PGW, PGW, PGW with nothing but problems at all levels. Customer service, a little bit of an oxymoron for PGW. We, I will say, almost never hear a problem with PECO. It doesn't interfere with the sale of a property. And what I have found since the change, and I don't remember the date, I'm sure you know it, is that the real estate community has become the bill collectors for PGW and the consumers have been hit hard with it and I think that if we begin to talk to the people on the streets about how they would feel, I think they would be happy to have it turned over to somebody else running it.

Thank you for your testimony. Tina Nelsen. (Witness comes forward.)

My name is Tina Nelsen and I'm speaking on behalf of CEPA, The Consumer Education and Protective Association. There are no 24 pros to selling PGW. I ask each and every Councilperson to consider the following: It is 151 RESOLUTION NO. 000773 possible that this Council can make a difference and turn PGW into an efficiently-run City-owned and operated utility company. If Memphis and Indianapolis can, so can we. Tie the $18 million payment from PGW to it City on the condition of productivity and accountability from this point forward; it's a start. If sold to an investor-owned utility company simply means that the people of Philadelphia will pay for that quote/unquote Gas Works twice. It's like purchasing a house for 30 years and then selling it and having to rent again and the proceeds of the sale goes to the third party. All city and federal development agencies should require all businesses that receive tax breaks or low-cost financing to use PGW as their primary fuel. Thank you for your time.

Thank you. I'm sorry to have you to struggle through that testimony. We've heard you before and you didn't struggle as much. So I know you must be feeling ill. Thank you.

Can I just make one 152 RESOLUTION NO. 000773 comment?

Yes.

I believe this Council can make a difference. I've heard from past stories that the past Council, it's been on the political view. I think this Council if they seriously listen to the people of Philadelphia and hear their cries for help that selling PGW is not a solution. And I think that each and every one of the Councilmembers can make a difference and turn PGW around into an efficient utility company.

I do believe the ability is there.

This is a start.

The issue is whether there is the will. And it's not just Council, there's second floor involved and the second floor and this extremely strong mayoral form of government sometimes has the upper hand. From when the initial problem started 30 years ago, the second floor drove the train in many ways and is driving the train today.

I think it's about time to switch the tracks. 153 RESOLUTION NO. 000773

Well, we need a charter change to do that. Thank you very much. Thanks for your patience. Action Alliance. (Witness comes forward.)

Please identify yourself for the record.

My name is Leray Williamson and I am testifying today on behalf of Action Alliance of Senior Citizens. Action a lines is opposed to the sale of Philadelphia Gas Works. As a former PUC Commissioner John Hanger stated that in yesterday's article in the editorial page of the "Inquirer," any buyer who purchases PGW will have to achieve $50 million a year in savings just to hold base rates at the same level as at the time of purchase. This is because a privatized PGW would have to pay $50 million more in taxes, mostly state and federal than PGW currently pays. We do not think that there is any chance of achieving this level of savings. At the same time, we expect that the buyer will come to City Council with a bill to 154 RESOLUTION NO. 000773 abolish the senior citizens discount. Since the buyer will not be able to make the profit it wants through added efficiency, it will try to make it on the backs of some of the community's most vulnerable citizens. We have had the senior discount for almost a quarter of a century. Philadelphia should be proud of that discount. The existence of that discount says that the City stands up for its seniors, recognizes what they have contributed to our community over years of hard work, and lends them all a helping hand in the years when their income is pretty much fixed, even decreasing in purchasing power. You can expect that the buyer will be asking City Council to eliminate the senior citizens discount. They can't do it without your permission. We disagree that the City cannot manage PGW well. You just have to put your mind to it, Council, the Mayor, the Gas Commission and PGW. If the City of Los Angeles can run an electricity utility efficiently, why can't we manage a gas utility? As a City, we just have not focused on the problem. You have to now. And you have to be 155 RESOLUTION NO. 000773 willing to accept reasonability for the terrible mismanagement that has taken place here. Customers are already paying over 50 percent more in gas bills this year than last year. That includes all seniors. How can you ask them to pay more, when the City is still taking $18 million a year out of PGW. Even when that comes from money that the company has borrowed and that ratepayers will have to pay back. We hope that the problems of PGW can be resolved without an additional financial burden being placed on the shoulders of the ratepayer. Thank you

Thank you for your testimony and for your patience. Please identify yourself for the record and proceed.

Frank Setsman. I represent the Home Owners Association of Philadelphia and we support your resolution to explore the sale of PGW. City Council approved $45 million for PGW this past October and we feel that the private ownership of the gas company will relieve the City of its PGW obligation, it will eliminate patronage, 156 RESOLUTION NO. 000773 it will also improve what is now a very poor customer service. Real estate owners can almost never reach PGW people on the telephone. In fact, the gas company is so inefficient that we have an associate who's been getting an estimated bill for his burned-out property for the last five years and when trying to sell the property to somebody who would come in to develop the property, the gas company is holding out for $11,000 worth of past gas bills that they said they can resolve by sending somebody out to read the meter, obviously, having never sent out there to read the meter. The money saved by good private management of the gas company can be used in a way that will benefit the City, the residents and the business community. Savings from the sale of the gas company can be used to upgrade and improve the City schools. Better schools give 3,000 members a better chance at renting and selling low and moderate income homes and more taxes will be paid to the City. We also feel the difference in the electric company and the gas company, one privately-owned one publicly-owned is incomprehensible. The gas company is so 157 RESOLUTION NO. 000773 inefficient; the electric company is very efficient. We supports your important resolution on the sale of PGW.

Thank you very much for your testimony and for your patience in waiting. (Witness comes forward.)

Good evening. Thank you for your patience. Please identify yourself for the record.

You're welcome. This has been an education. I confess I've not been in this Chamber before. I've seen bits and pieces on television. I think this has been good. I appreciate the tone of these proceedings. What we have been saying on both sides has been considerate and in a considerate manner. I'm here as an individual. I worry about City Council relinquishing any kind of control that it currently has over what's been happening at PGW. I will not quarrel because I have also been a victim of inefficiency, bad meter reading, strange billing and all the rest. But I think that I have less faith than I may have once have in competition in the capitalistic system in providing the best service to 158 RESOLUTION NO. 000773 customers of any sort and especially in this situation in which there is no chance for competition, no other sources of what we need. I want the City to stay in this arena. I want better management, certainly, and much better oversight. This will put more strain, if it actually is done, on City's resources because we will have to employ good people to do these very necessary jobs. I think it can only be returned in the goodwill, the shock surprise, the pleasant surprise of customers who will get better service from PGW. I actually have a tri-part presentation here. The second is a statement from another concerned individual. May I read it, sir?

Please.

I am speaking in his voice as he dictated this to me. "I would like to thank Councilman Kenney and the City Council for the opportunity to speak before you today. My name is Craig Roberts. I'm a retired orthopedic surgeon and live in Phoenixville, Northern Chester County. My wife works full time in Center City and I have a son and daughter who are 159 RESOLUTION NO. 000773 residents of Philadelphia. I have many friends in the City. What brings me here today is my personal contact with and knowledge of individuals and families in the City who are working in low-income jobs without benefit or are on disability or are elderly or are on fix income who are struggling on a daily basis just to survive, who are suffering the most from the recent precipitous increases in energy rates, particularly in gas. "I know that this hearing is not about gas rates, I think that the so-called crisis in energy rates and policy is one reason that we are all here today. Many people in Philadelphia are literally forced to choose between paying for gas and electric and food and medicine. To call this a life or death situation for some is not a hyperbolic claim or an exaggeration. I believe the current crisis in Philadelphia swirling around PGW and its management and gas rates is not being caused by mismanagement, rate caps, faulty rules of deregulation or supply and demand. In our so-called booming for some economy, there have been expanding natural production in the United States. Natural gas and electric energy producers make unprecedented 160 RESOLUTION NO. 000773 profits. Wall Street is salivating. "Three out-of-state energy companies are attempting to get permits to build gas-powered electric generation plants within miles of my 6 house. What is the justification for massive 7 wholesale price increases of gas coming from 8 Appalachia and the Gulf of Mexico? I think that 9 there is no justification for it, but there is a 10 reason for it. Similar to the OPEC oil crisis of 20 11 years ago, the energy producers of this country are 12 creating a crisis to push for more deregulation and, 13 in our case today, privatization of PGW to ensure 14 more control unregulated rates and profits. 15 "Three years ago, in order to secure 16 loans from the IMF and from rural banks, Costa Rica 17 privatized their school system and health system. 18 Today, fewer children are in school there and fewer 19 have access to health care. 20 I certainly expect the Mayor and the City Council to correct any mismanagement and corruption at PGW. I fear that privatization at PGW might just be a way for the City government to not only shed a headache, but also shed a responsibility to the people of Philadelphia and to place many 161 RESOLUTION NO. 000773 people in jeopardy of spiralling gas rates, increasing health problems and, yes, death."

I'm sorry. You didn't state your name formally for the record.

I'm sorry. Judith Sussholtz, S-U-S-S-H-O-L-T-Z. I'm an adjunct professor of english at Community College of Philadelphia.

Please continue.

I hope that after this, you won't find the third and last part of this trivial. It is a more general concern of the results of increased gas rates. I am privy to two specific instances of its impact upon the arts in this City. I am a member of Mendelson Club of Philadelphia founded by the same person who later began the organization which became the Philadelphia Orchestra. We are in our 127th season. I'm also a patron of the Sedgwick Cultural Center on in Mount Airy on Germantown Avenue. Both of these organizations produce, present, create opportunities for art. Art is one of those drawing cards of this City. But not too many people beyond the City know 162 RESOLUTION NO. 000773 what we have here. It certainly is one of the selling points when we're trying to attract businesses which must convince people, their executives if you'd like, of the value of the City in general. Mendelson Club was approached by two different orchestras in Caracas, Venezuela, to do a very quick tour this June, this coming June. We would be singing two different programs, two different orchestras, two different venues. We'd be down there for perhaps seven days at most, which means that almost all of our time would be in rehearsal and performance. This is not a tourist jaunt. We accepted, but it was predicated upon our being able gather in enough people to sing the music. We were three people above our minimum last week. Last night's rehearsal break gave us a chance to talk. We had all received our PGW bills over the weekend. Hair was whiter last night than it had been a week before. And some of the people who had hoped to be able to go down to Venezuela -- and I should say it's on our own money. We must pay our way for both fare and hotel bills and all other costs. This is on us. What the City of 163 RESOLUTION NO. 000773 Philadelphia gets is word is spread, we are here. This is our base. And we are a valuable commodity. After last night, we're not sure we have the number of people who can say, yes, this June we will be able to reach into our pockets for about 1400 bucks to spend that one week in Caracas as, if you'd like, good will ambassadors to a foreign country. The other organization is Sedgwick Cultural Center. It's a converted movie house on Germantown Avenue which has been in existence about six years now. There are classes for children from nearby schools and not necessarily affiliated with schools. There is an art gallery. There are all kinds of performances, plays by local playwrights who also happen to be nationally known, musicians, everything from jazz, classical, hip hop, everything. It is a place for the community to gather and it happens that despite Mount Aire's wonderful ambiance, it hadn't had a gathering place. Ther it is, and it's there connected with the arts, for the arts. The director of the Sedgwick Cultural Center received a gas bill for the performance space in December of $1800. The most recent bill, the January bill is $3,000. They have to close the 164 RESOLUTION NO. 000773 space for the rest of the winter because they cannot afford to heat it. This not a matter of life and death, but it certainly does impact upon the quality of life of many people in this City. These are two instances that I personally know about presenting them to you this evening as a consequence -- it's not a direct consequence, but it certainly is caused directly by the increase in gas rates. I think that such effects must be considered by City Council whenever you are taking into consideration what to do about PGW. Thank you very much.

Thank you very much for your testimony. Mr. Hill. Please identify yourself.

My name is Roy Hill. I'm the director of the Robert B. Hill Company. Thank you.

You're welcome. Thank you for waiting. Thank you for your patience.

Our reason for being here is that our company in concert with another Cedar Rapids, Iowa, the Darting Group, believe that we've come with a solution for your crisis. That 165 RESOLUTION NO. 000773 solution -- and I'm going to leave a number of packages here for Councilmembers and staff members.

Thank you.

We believe that the Philadelphia Gas Works financial delima can be resolved through a method of financing that will allow the City of Philadelphia to sell PGW and refinance the debt of PGW, including the retirement of all City of Philadelphia tax-exempt bond financings that are related to PGW. Our method of financing will accomplish the following: Provide a 100 percent of financing of the PGW accumulated debt including all fees and associated costs. Allow the City of Philadelphia to lease the PGW utility to a major utility company. Structure the repayment term to equal the lease term given to the major utility company. We would structure the financial transaction as a sale leaseback transaction. This would mean that the City of Philadelphia would sell PGW for an amount that would retire all the outstanding PGW liabilities. And as I noted before, including all tax except financings. The final transaction amount, of course, would include, as I 166 RESOLUTION NO. 000773 said before, all costs of the transaction. Additionally, the entity that would be created to by PGW with the investor-related funding would be paid an annual administrative fee to cover cost of annual audits and other expenses to protect the investor financing. All of these related activities would be contracted with firms based in the City of Philadelphia which would increase City of Philadelphia business tax revenues as well as employment. One of the truly positive aspects of this type of financing proposal would allow the City of Philadelphia to restructure the debt without the utilization of any direct funding from the City of Philadelphia general revenues or any additional bond financing. Additionally, our financial relationship has indicated that this transaction may qualify and could be structured as a tax free sale leaseback which would lower the cost of the transaction on a going forward basis for debt service coverage over the approximate 30-year term that we would envision. After listening to a number of comments here, Mr. Chairman, a couple thoughts came to my 167 RESOLUTION NO. 000773 mind, the concerns that have been addressed by some of the Councilmembers, the head of the union at PGW. In this transaction, and there's a pullout schematic that shows the breakdown. What happens is that we would create an entity. We would buy PGW. We would lease it back to the City of Philadelphia. Our proposal is based on the fact that you don't want to be in the business of operating a utility. At that point, you would lease it to a major utility. Within that lease contract, I would believe that you would take the negotiating position to protect to the best of your ability, not only the citizens of the City, the workers of PGW, but also the people that do get discounts for elderly, low income, etcetera. All of this can be accomplished in this type of transaction with a lot of due diligence on the part of the City in its negotiations with a major utility. We have discussed this and made the appropriate arrangements with two significant financial relationships. One of which is the Blackford Development Company, and that company has a long history and track record in providing financial support and monies for the funding of sale 168 RESOLUTION NO. 000773 leaseback transactions. And as well as the investment banking house of Tucker Anthony, Incorporated, which last year, as noted in their letter that much accompanies this proposal, was 17th among municipal underwriters nationally last year. And they have done quite a number of municipal bond financing here in the Commonwealth of Pennsylvania and in the eastern part of the United States. It's a highly respected and regarding investment banking house.

I would just like to finish that we would be more than happy at any given time to bring the appropriate people in to discuss with you the ramifications of this type of proposal and as to whether it would be something that the City of Philadelphia would be interested in pursuing. Thank you.

Thank you for your testimony. We'll be happy to present this initial concept top financial staff here at Council and also refer to the Mayor's Finance Director for comment. Have you had any contact or conversation with the City Administration, the Mayor's Office or anyone in the Mayor's Office? 169 RESOLUTION NO. 000773

Back in October in reference to a related issue before the City because we believe that the concept would have worked in stadium financing, we did send a copy of a proposal that was similar to this at this that time. So far, we have not had a response.

I wouldn't expect one back on the stadium at this point. We'll see if we can't get you an appropriate response to this particular proposal at least in its infant stage and then see if they will flush it out a little more. But I do appreciate your testimony and we will refer this to appropriate technical staff for review.

Thank you very much.

We met with Mr. Hill. He was referred by Lee Tolbert, one of our strongest community leaders, and certainly we thank him for his commitment to trying to help solve the problem.

Thank you very much, Councilwoman.

Could you please identify yourself for the record? 170 RESOLUTION NO. 000773

My name is Alfonso Cohen.

Sir, could you spell your last name for the stenographer.

Yes. C-O-H-E-N.

Thank you. Please proceed.

I've lived here in the City of Philadelphia since about 1922 and I haven't left the City except for four years which has been in the service. And I worked in common industry for approximately 40 years for one company. I worked 40 years for three generations at one company, and I retired at the age of 67. And I'm also a member of Benefit Workers Council, Philadelphia, which is South Philadelphia. I have never been on Welfare or incarcerated for jail. But after working, I found myself with a lot of physical problems health-wise, arthritis, heart trouble, whatever. But up until that time of retirement, I paid bills. Each year it seemed to get harder. The dollar doesn't buy anything. Today, I find it most difficult because of the medical problems and the bills that the gas company is killing me. 171 RESOLUTION NO. 000773 When I started with the gas company, I lived in the same house for 50 years and better. My gas bill was approximately $40. Now it's over $300 or $400 a month, and Social Security doesn't cover that and each month I seem to keep falling behind. There's just no way out. What I used to buy for the dollar, I need $5 to buy it now. This is where it's at. But I'm not the only one in this situation because all us seniors are in this crunch. We don't get enough money to cover it. And when you raise these bills up to 300 and $400 a month, you may as well just send us to die because we can't afford it. I hope and pray that the City of Philadelphia will contain and keep the gas company, but make it affordable for the people that live here on the income that they have. In the old days, we had work that paid a decent wage. Poor people today are working two jobs, three jobs, and this is only killing them.

Sir, are you involved at all with the LIEAP program? Do you receive any his assistance? Are you enrolled in any of those programs at PGW? 172 RESOLUTION NO. 000773

I've tried. They said, Your income is too big, you're above the guidelines, but they still send the bills. And you don't have control over everything. I don't have control of the water, the gas, the electric, the telephone. I'm 79 -- not 79, but 89. I wish I was 79; I had no trouble then. But at 89, it's hard to move around. I've tried to stay from Welfare and all those other things, but today I would welcome them.

We appreciate your insight into the situation. (Applause.)

Do you have any testimony to add? Could you identify yourself for the record.

Hello, my name is Luis Figueroa. I'm here with the Philadelphia Workers Benefit Council, and there's two people who weren't here today who have very short statements that I'd like to read, if I may.

Please.

"My name is Dorothy Farabee. I live in North Philadelphia and I'm a retired secretary. The divestiture of public assets 173 RESOLUTION NO. 000773 by thier sale to private entities is not in the public interest. How will people live if they're confronted with rate increases that have no ceiling and they have to struggle without money to pay rent and buy food? And we're not just talking about those of marginal income. Will they be hostage to the interest of bondholders? Would it not be in our best interest to hold on to public ownership? "If the deregulation takes place, that means no regulation which means anything goes. We do not want to follow the path of California which spells disaster. We demand affordable energy and no 14 privatization." The next one is from Helen H. Cutner. "My name is Helen H. Cutner. I live in Center City and retired and living to social security with very little savings. And then I got the bill with 50 percent increases in the rates for the natural gas that put it about $65 dollars more than it would be. So I am having to pay out of my savings and keeping the thermostat about 50 degrees. It's ridiculous, but I don't know what else to do. I can't afford this. I've already cut most of my expenses to the bone. I have no choice but to live 174 RESOLUTION NO. 000773 without heat or just enough to keep from freezing. I thought this was a regulated company. You're just giving them card blanche to charge whatever they want to charge." Thank you.

Thank you very much for your testimony. Thank you for your attendance here this evening and your patients. This hearing is recessed until the call of the Chair. Thank you. (Hearing adjourned at 6:25 p.m.) - - - 175 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of February 8, 2001, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS ___________________________ Lisa C. Bradley, RPR and Notary Public