Is there a report or 17 has there been a report prepared or is somebody 18 working on a report looking at alternative operational structures, i.e., the City not being in the gas business? What's the status of that?
We've engaged Lehman Brothers to look at alternative operating formats 63 5/1/02 - FINANCE - BILLS 020245, 020246 for the company. We have not, because of the complexity of the issue, had a final report nor have we made a determination. This issue is much more complex than even we envisioned when we first started out. And many of the issues that you've mentioned are issues that are being addressed as we move forward. And as soon as we have a final report, we'll share it with City Council.
What was the scope of the report? What were they asked to do?
They were asked to look at all possible alternatives for the operation of the gas company.
I don't know at this point. I'd have to check with Lehman and see when we're going to get something. We've not been actively engaged. We've been working through some of the numbers that have been presented to us before. We thought that there were some issues with 64 5/1/02 - FINANCE - BILLS 020245, 020246 verifiability of some of their numbers and so we've not had a report.
They couldn't verify all of the numbers. We have some issues with post employment, health benefits. There are issues with the pension liabilities and the funding status of the pension plan that need to be addressed before we move forward and the disposition of the assets of the pension plan.
How much is it? 65 5/1/02 - FINANCE - BILLS 020245, 020246
We've gone through a number of meetings with them. At this point, it's in our court to finalize some of the additional questions we have for them, and I'm hoping that we'll have a final report in the next few months.
Now, Ms. Davis, this is not going to be similar to the exercise that we went through with regard to the agreement on the school side between the Mayor and the Governor, the unending search for the never-to-be-produced report?
No. The Administration is very interested in bringing this to conclusion. We share your frustration with the gas company and with the results and we, too, feel that there is some value in our disposing of the company, but we need to do it in a way that does not unnecessarily burden the City with any of those liabilities that we've thus far identified, especially for post-employment health benefits.
Lastly, I need you 66 5/1/02 - FINANCE - BILLS 020245, 020246 to within some range to give me a date.
Let me get back to you with a date. I'd like to talk to the Chief of Staff and some of the other people involved.
All right. If you would communicate that through the Chair, I would appreciate it.
Thank you, Madam Chair. I'm sorry, lastly, the $18 million, is that expected to be paid in this -- are you anticipating an $18 million in this Fiscal Year?
Thank you. Councilman O'Neill and then Councilman Kenney.
Thank you, Madam Chair. The answer to the question that you made 67 5/1/02 - FINANCE - BILLS 020245, 020246 to Councilman Nutter is -- I'm trying to remain calm, but it's upsetting because what you described in Brooklyn and in Baltimore was tentatively talked about two years ago here. As I understand why a dual utility can get the economies of scale necessary when it comes to staffing and delivery and customer relations, customer service, all those things, describe what quietly a company in Philadelphia was attempting to do, PECO, to have discussions with some members of Council and people in the Administration to talk about a potential acquisition back then and were chased away. We're basically told don't talk about it. And when I tried to raise it again with them through some of their representatives, they said, Oh, we can't talk about this. We already got taken to the wood shed by the Administration on this so we're not talking about it any more. Now, to me, it's extremely frustrating to continue on down this very difficult road. Now, of course, when asked, the Administration will say they had no formal discussions with anybody, but there were discussions that were going on and there were some feelers and meetings that were set up 68 5/1/02 - FINANCE - BILLS 020245, 020246 because I attended them, to have them talk about doing something like that which would have given us the economies of scale, which would have taken us out of this business, would have been able to reduce the cost and if we could structure the debt in a way that would have kept the City not for being liable for it or some pay-out or buy-out of it over a period of time, we'd be out of this mess by now. So now we have Lehman Brothers doing $250,000 study. We don't when it's coming. We had a company in Philadelphia that's strong, solid, dependable, and deliverer of utilities in a similar grid that the Gas Works is delivering, but two years ago we basically chased them away. I don't understand why two years later we're still waiting for a report while the company is getting worse -- maybe structurally getting better through your efforts, but fiscally not getting any better necessarily. And then we'll be back in the same boat we were two years ago. And I'm telling you, I remember going to a representative of PECO who was talking to me about this, and when I raised the issue, the guy said, "Under no circumstance am I allowed to talk about this. We already got beaten up pretty much by the 69 5/1/02 - FINANCE - BILLS 020245, 020246 Administration because we even suggested it happening. And then you tell me the Brooklyn, Baltimore scenario, I said, What are we, nuts? It just doesn't make any sense.
The issues that you raise, I can't address. I don't know what the conversations were.
I understand. I'm putting on the record because I know they existed. I know what happened. And I know they were chased. And now we're back spending money for consultants to do something that could have been done through negotiation two years ago perhaps taking us out this morass that we seem to be in every six months to a year. It's extremely frustrating to have that happen. It's not your fault, I understand. But it's just for the record, this could have been resolved with a reputable company in Philadelphia that delivers to utilities that were willing to talk and were told basically to take a hike, don't even talk about it. And now we're sitting back here waiting for a Lehman Brothers report. They'll probably tell us the same damn thing. It's just absolutely ridiculous and it's a waste of 70 5/1/02 - FINANCE - BILLS 020245, 020246 ratepayers' money and a waste of taxpayers' money in the end. Let me just ask you a question about the size of the company because we talked a little bit about the health benefits that were not -- is it safe to say that the health benefits were not resolved the way in which you envisioned them to be resolved?
Do we more customers in PGW now than we did five years or less.
When I came two years ago plus, we had about 200 more people than we do right now.
And are we doing 71 5/1/02 - FINANCE - BILLS 020245, 020246 also issues dealing with not replacing people that retire or is there a hiring freeze?
Well, as I indicated in my comments about reorganization, we're attempting continuously to revise processes and procedures and to put in new technologies in order to keep the number of people declining. And we have a forecast, I think it's out two or three years, where we're down to about 1500. We're about 1750 right now. We can't get there overnight.
Let me put a caveat on that. The only problem I'm facing right now is that the PUC is putting additional mandates on us for things that we don't do now.
Well, for example, they want a meter change-out, which is to say you have to physically go in and take the meter out and calibrate it and so forth. They want that over an accelerated period of time, eight, nine years. We do it 15.
Let me ask you just 72 5/1/02 - FINANCE - BILLS 020245, 020246 one final question on revenue and the way people pay their bills. I would assume it would be advantageous for -- it is advantageous when people decide to go on a budget that they pay the same amount per month through the whole months of the 7 year. It's a better cash flow situation? 8
What percentage of 10 our customers, do you have any idea, pay on a 11 monthly budget? I know I do. 12
It's come down slightly because of the computer problem and we're trying to get it back up. It used to be at about 80,000, and it's now at about 60,000. So we're talking --
So if we go in the higher direction, it's better for the company.
Is there a way to incentivise financially that situation? I mean, it would seem to be theoretically that if everybody in the City was on a better budget, you would be having consistently steady cash flow throughout the 12-month period, not having these rises and dips in collections. 73 5/1/02 - FINANCE - BILLS 020245, 020246
Well, that's assuming that you can forecast your gas cost, but that's right. Theoretically, that is correct, in a stable circumstance.
Is there a percentage discount, for example, that could be given that would make sense?
We're looking at all sorts of options right now. That is one.
Because I think it's any better for the ratepayer too. Certainly, if we do have a severe winter, I mean, people do get -- I think a lot of our arrearage is based on people never being able to catch up after a period of time. If people can have a consistent amount of money, whether it's 30, $40 a month that they know they're paying as opposed to getting whacked with a $600 bill for February, it seems to be a win/win for everybody.
I think in theory it's an excellent program and we try to encourage it. There 74 5/1/02 - FINANCE - BILLS 020245, 020246 are some problems with evening our cash flows, but as a concept, it's very good one.
I can't say that right now. I'd have to look at it. We're looking at all the options right now in terms of encouraging revenues.
Good morning. I apologize. I was speaking to some senior citizens about PGW, actually. I have no problem with this legislation. I don't think we're ever going to get the money. So I have no problem pushing back the date. But I think somebody else is going to own the company before we get this money, whether it's 2006, 2009 or sometime sooner. I just have a question. Are there any other cities, particularly cities with a mix of people below the poverty line as we have that own their own utility, whether they manage it themselves or contract out the management, that we can look to for any comparatives or best 75 5/1/02 - FINANCE - BILLS 020245, 020246 practices or are we it at this point? I know there's a lot of publicly owned gas companies, but the jurisdictions are a lot smaller than ours and much different demographics oftentimes. Are there any that have our mix or even anything close to it?
There's none that have the geographic and demographic mix that we do. It's a very small service territory and you have this high concentration of poor. I mean, you can say downtown Brooklyn. Well, that doesn't work because you've got Queens and sections of Long Island. Or you go to Baltimore, Center City, yes, but BG&E is not restricted to the city limits. So you don't have anything quite the same as we have here. And we've been struggling with that. We are the largest local distribution company of gas in the country by an order of magnitude, I mean, it's much larger than the next one.
You're welcome. Councilwoman Tasco, you had a follow-up question? 76 5/1/02 - FINANCE - BILLS 020245, 020246
I want to kind of follow-up on that. While you mentioned Pittsburgh and other places that may have of public utilities, but even though they may not be to the scale of Philadelphia, they do have a difference in economic classes. So who do these companies, whether it's one-third or whatever, how do they handle low income citizens who can't pay their bills? Are there provisions for them? What provisions do they provide to address that issue?
The Customer Responsibility Program, the CRP, that you're familiar with is a model similar to that write exists in the rest of the State. So let's take Pittsburgh, for example. There is what's called a CAP program, Customer Assistance Program, much like our CRP. And they enroll people and they administer it much the same we do. And if people can't pay, it falls to the bottom line, which is to say it is a loss which is the same that we're experiencing. The difference is that the orders of magnitude, the number of people involved is much smaller so that the companies are less impacted. At least, that's my impression from what studies we've been able to 77 5/1/02 - FINANCE - BILLS 020245, 020246 do. And when we come forward with this re-filing, with this restructured filing, you'll see a lot of that kind of comparative analysis as to why -- where we fit into the overall picture in Pennsylvania. But to answer your question as directly as I can, we have so many poor relative to other areas and other utilities in terms of demographics and geographic dispersion. And we don't have, which many utilities do, a very industrial base. We simply don't have that here to help support the low income people as well.
Thank you very much. Are there any other questions from members of the committee? Seeing none, this will end our public hearing part of this committee hearing. - - - 78 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING COMMITTEE ON PUBLIC PROPERTY AND PUBLIC WORKS - - - Wednesday, May 1, 2002 - - - Public Meeting conducted by the Committee on Finance, held in Room 696, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: BILLS 010554, 020245, 020246 - - - PRESENT: COUNCILWOMAN JANNIE BLACKWELL, Chair COUNCILWOMAN MARIAN TASCO, Vice Chair COUNCILMAN JAMES KENNEY COUNCILMAN FRANK DI CICCO COUNCILMAN BRIAN O'NEILL - - - 79 5/1/02 - FINANCE - PUBLIC MEETING
We will not enter into our public meeting part of this hearing. The Chair recognizes Councilman Kenney with a motion regarding Bill No. 010554.
Thank you, Madam Chair. I move the Bill No. 010554, be reported out of the committee favorably and a request made for rules suspension to allow First Reading at our next Council Session. (Duly seconded.)
It has been moved and seconded that Bill No. 010554 be reported out of committee with a favorable recommendation and also a recommendation for suspension of the rules so as to permit this bill being considered at our next Session of Council. All in favor? (Aye.)
The ayes have it and so this has been done. The Chair recognizes now Councilwoman Tasco with regard to an amendment to Bill No. 80 5/1/02 - FINANCE - PUBLIC MEETING 202245.
Madam Chair, I offer an amendment to the bill, Article II, Section 5 2.05, Powers Reserved. It says, "Nothing in this Ordinance is intended to or shall be construed to affect the authority of the Gas Commission under Section 5-902 of the Philadelphia Home Rule Charter or the Management Agreement, to the extent consistent with the Natural Gas Choice and Competition Act."
There is an amendment to this bill that is on the floor. Are there any questions in this regard? Councilman Nutter.
Madam Chair, no 17 question on that amendment, but in our packages we have it appears two other amendments.
This is on 020245. I have an amendment on the other bill.
One amendment had been circulated earlier and it has been renegotiated and the amendment that I read is the amendment that 81 5/1/02 - FINANCE - PUBLIC MEETING we have offered.
The Chair recognizes Councilwoman Tasco for a motion for the adoption of the amendment.
I move for the adoption of amendment. (Duly seconded.)
It has been moved and seconded that an amendment to Bill No. 11 020245 be adopted. All in favor? (Aye.)
The ayes have it, so the amendment adopted. The Chair recognizes Councilwoman Tasco regarding Bill No. 020245, as amended.
Madam Chair, I move that Bill 020245, as amended, be reported out of committee with a favorable recommendation with a suspension of the rules. (Duly seconded.)
It has been 82 5/1/02 - FINANCE - PUBLIC MEETING moved and seconded that Bill No. 020245, as amended, be reported out of committee with a favorable recommendation and also a recommendation that the rules be suspended so as to permit consideration at our next Session of Council. All in favor? (Aye.)
The ayes have it and so this bill will be reported out of committee. The Chair recognizes Councilwoman Tasco with regard to an amendment to Bill 020246.
Madam Chair, I have an amendment for Bill 020246, Section 2. It reads, "The City is hereby authorized to extend the principal repayment date of that certain temporary advance made to the Philadelphia Gas Works in the amount of $45 million, as memorialized in that certain loan agreement dated November 27, 2000, to a date no later than August 29, 2006." This is the appended part: "Provided that during the extended term of such temporary advance, PGW shall continue 83 5/1/02 - FINANCE - PUBLIC MEETING to file with the City Council, the Gas Commission, and the Director of Finance no later than the fifth business day of each month: "a. Monthly updates to its 'Budget of Cash Receipts and Disbursements' reports for the preceding month and "b. Monthly status reports regarding achievement of PGW management's stated goals for productivity/cost savings and collection of billed revenues."
Are there any questions? Seeing none. The Chair recognizes Councilwoman Tasco with regard to the adoption of amendments to this bill.
I move for the adoption of this amendment. (Duly seconded.)
It has been moved and seconded that the amendment to Bill 020246 be adopted. All in favor of the amendment of this bill? (Aye.) 84 5/1/02 - FINANCE - PUBLIC MEETING
The ayes have it. The amendment is adopted. The Chair recognizes Councilwoman Tasco for motion on Bill 020246, as amended.
I move that Bill 9 No. 020246, as amended be report out of committee with a favorable recommendation and a request for suspension of the rules so this bill can be heard at the next Session of Council. (Duly seconded.)
It has been moved and seconded that Bill No. 020246, as amended, be reported with a favorable recommendation and also a recommendation that the rules be suspended as to permit First Reading at our next Session of Council. All in favor? (Aye.)
Therefore, the ayes have it. The bill will be reported out with a favorable recommendation. 85 5/1/02 - FINANCE - PUBLIC MEETING We thank you all for coming. Thank you. - - - 86 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 May 1, 2002, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON FINANCE ___________________________ Lisa C. Bradley, RPR and Notary Public