Committee Hearing, March 30, 2004

COUNCIL OF THE CITY OF PHILADELPHIA CONTINUED PUBLIC HEARING COMMITTEE ON FINANCE and COMMITTEE ON TRANSPORTATION AND PUBLIC UTILITIES - - - - Room 696, City Hall Philadelphia, Pennsylvania Tuesday, March 30, 2004 2:20 p.m. - - - - BILL 040153 - An Ordinance approving the Fiscal Year 2004 Capital Budget providing for expenditures for the capital purposes of the Philadelphia Gas Works... RESOLUTION 040229 - Resolution calling upong the Committee on Finance to conduct hearings on the audit of the Senior Citizens Discount program offered by the Philadelphia Gass Works. - - - - RESOLUTION 040149 - Resolution authorizing City Council's Committee on Transportation and Public Utilities to hold public hearings to investigate the proposed gas cost rate increase to be effective September 1, 2004... RESOLUTION 040216 - Resolution authorizing City Council's Committee on Transportation and Public Utilities to investigate and hold hearings on the Petition of the Philadelphia Gas Works to the Pennsylvania Public Utilities Commission... - - - - V A R A L L O Incorporated 2 PRESENT: COUNCILWOMAN JANNIE BLACKWELL, Chair COUNCILMAN DAVID COHEN COUNCILMAN FRANK DICICCO COUNCILMAN W. WILSON GOODE COUNCILMAN BRIAN O'NEILL COUNCILMAN JUAN RAMOS COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN TASCO COUNCIL PRESIDENT ANNA VERNA I N D E X RESOLUTION 040229 PAGE THOMAS KNUDSEN, PGW.................. RESOLUTION 040149, 040216 LYNNE ABRAHAM, District Attorney..... 48 THOMAS KNUDSEN, PGW.................. 68 TIMOTHY KEARNEY...................... 95 REVERNED BRUCE EDWARDS, Urban Leadership Council............... 102 REVEREND JAMES ROYAL, CROP........... 112 GEORGE MOY, Philadelphia Chinatown Development Corporation.......... 119 LANCE HAVER, Office of Consumers Affairs.......................... 126 4 03/30/04 - FINANCE - RES. 040229

Good afternoon. Thank you all for your patience. This is a continuation of the Finance Hearing originally scheduled for March 24th, 2004. The hearing was recessed in order for PGW to come back today to address concerns outlined in Resolution No. 040229, sponsored by Councilman Brian O'Neill, to my right, which deals with the Senior Citizen Discount. Soon after we're finished taking testimony, the Committee will again recess to allow testimony to be taken on the two resolutions listed before the Committee on Transportation and Public Utilities. Once that's been completed, the Committee on Finance will reconvene for the purpose of reporting out the bill. Thank you. We see Mr. Knudsen, President and CEO of PGW. I have one question for you. If you would like to make a statement before then, it's in order. This a continued hearing, so we've had most of our testimony in advance.

Thank you very much, 5 03/30/04 - FINANCE - RES. 040229 Madam Chair. If I might, I'd like to just summarize very briefly the points that I made at the last --

Excuse me one moment. Let me note for the record that we have a quorum. To my left is the Vice-Chair of the Committee, Councilwoman Blondell Reynolds Brown; to her left, Councilman W. Wilson Goode; to my right, Councilman Brian O'Neill; Councilman Rizzo is here; Councilwoman Marian Tasco and Councilwoman Donna Miller are here. So we absolutely have a quorum. Councilman Frank DiCicco is here. Thank you very much.

Thank you. A year ago, PGW had a financial plan that was working. There were to be no 20 increases in rates. The obligation to the City of $45 million would be repaid and PGW would get out of the cycle of raising 100 percent debt for its Capital Program. A national problem arose. The cost of the gas in the pipes to our customers 6 03/30/04 - FINANCE - RES. 040229 started to rise, and it just kept going. As prices rose, over which PGW has very little control, our bad debt rose as well. The proposed mechanism or clause that I am proposing is a flexible answer to this problem. The answer was not in raising the base rate permanently. It was, I thought, a more responsible position to provide some flexibility, that were our condition to improve -- again for reasons we can't necessarily control -- I thought if our conditions would improve, that the mechanism would again benefit customers. Just so I'm very clear, management does not want to raise rates. If people pay, this mechanism will not be used. But we can't take a chance on PGW's very survival. What this mechanism does is provide the City and the customers with a type of insurance policy, that if something goes wrong, we have a way of raising the liquidity that we need in order to sell our bonds in the public markets. When we filed with the PUC last month, we conservatively assumed we would do 7 03/30/04 - FINANCE - RES. 040229 no better than last year, which was to collect 87 cents on the dollar billed. With an aggressive collection effort underway, we are now collecting -- understand that this is only part way through the year -- approximately 90.5 percent, or 90.5 cents on the dollar billed. If we do no worse than we are right now, this request for this mechanism will be only for $23 million, not the $47 million as requested. If we can get to the historic level of 92 cents collected on the dollar billed, there will be no request made of customers. It is my plan to get not only to the 92 cents on the dollar billed, but to go beyond. Then there would be no implementation of this mechanism at all. Understand what I am asking for. I am asking for a mechanism to be approved and put in place for our use, and only if we need it. It is not an automatic requirement to raise rates. But we do need this mechanism. Many hard working people have pension funds that invest in municipal 8 03/30/04 - FINANCE - RES. 040229 securities, PGW's bonds specifically. They will not put their money in our bonds without assurance that their interest will be paid, and ultimately that the principle will be returned to them. We need to sell a bond this summer in order to keep our system safe and reliable. We need investors. We need paying customers. Our answer to this problem is that all customers must pay for the service they receive or arrange a fair payment schedule with the company if they are not able to pay the entire bill. It is my intention to be as aggressive as this company needs to be to save PGW. Thank you.

Thank you very much, Mr. Knudsen. Per our previous conversations, you know -- and I've said this to anyone who will listen -- that I'm against any system where customers are forced to pay for one another. I think it's unfair. I've tired so of hearing it on the radio, that somebody pays for a person who can't pay. 9 03/30/04 - FINANCE - RES. 040229 I do believe that if most people had a choice, they wouldn't mind helping the senior citizen or somebody in need. You get into all kinds of questions. But then you also raise another question. There's always talk about the residential community. But what about the commercial community? Does a person who has one employee pay for a person that has 50? I mean, you get into all questions and considerations that I don't believe we need to do today. But we are asking if we can have your commitment today -- you've already said you will make every effort to increase your collections -- that you will come back to consult with Council before and if PGW would decide to make this surcharge.

I indicated to you earlier that I would consult with Councilmembers on the assumption behind all this, that the PUC does approve our petition and that we do have the mechanism in place to act upon later on in the summer.

I have no 10 03/30/04 - FINANCE - RES. 040229 idea what "mechanism in place" means.

I'm sorry.

I'm trying to separate out your Capital Program with the surcharge so we can move forward. But I don't know --

I agree to come, as we discussed earlier today -- that in around the middle of June we will know whether our collection efforts are sufficient to require -- let me turn it around -- that our collection efforts haven't been successful and that we will need to implement the mechanism. At such time, I will come and consult with the Members of Council with regard to that possibility and how much money we might need to ask for.

We tried to make it simple for you. Anybody on the Committee have a question? Councilman DiCicco and then Councilman Rizzo and then Councilman Kelly. I'm sorry. I did not know that 11 03/30/04 - FINANCE - RES. 040229 Councilman Kelly is here. Councilman DiCicco.

Thank you, Madam Chair. Good afternoon, Mr. Knudsen.

Good afternoon, Councilman.

I'm following up on the comments by the Chair. I don't think that most decent people who are employed or have a sufficient income would mind or do mind helping those who are less fortunate. My concern is -- and this is not directed at you personally -- that when I asked a question last week or the week before about the priority in which customers who have other utilities or opportunities for electronic devices in their homes, in what order does PGW get paid, you're at the bottom of the list. And it always disturbs me -- cable TV is somewhere around second or third. It's about one or two rungs above the bottom of the ladder, which you're at the bottom. My question is -- and if you 12 03/30/04 - FINANCE - RES. 040229 answered this last week, I apologize for asking it again. I think I left around 6:00 or so that evening. What is PGW doing in those areas where we know that people are able to meet their obligation to pay for other utilities -- and again in particular I guess I'm picking at one, the cable TV. I can tell you that I have cable TV at my house, and at one time I was paying almost $66 a month for stuff that I never even use. And a friend of mine said, you're never home. "You don't watch TV that much. You can save yourself a heck of a lot of money." I'm in a better position than most people. I have a good salary. I have other means of generating revenue. And I decided for economic reasons to get rid of the HBO and all the other bells and whistles. I have standard. I've reduced my monthly payments by 40 bucks. I have to believe -- I don't know if there's any way of proving this scientifically -- that those customers who are paying that cable TV probably have the best, the Cadillac, if you will, of the Comcast 13 03/30/04 - FINANCE - RES. 040229 cable programs that are available to them. That for me is the most disturbing part about this whole issue. When I go back to my constituents and talk to people about, you may have to pay more because others are not paying, the question is, "I don't mind paying for someone who can't pay, but why should I pay for those who are basically getting away with not paying, and in some cases have better opportunities and things going on in their households than others do?" My mother and my mother's generation would forego television if it meant paying the mortgage payment and the gas and the electric. People make those decisions. What are we doing about that? Is there anything we're doing? What is the company's aggressiveness, if you will, in those areas? Is there something that we can do, even at the state level, which would be able to put PGW or any of the utilities in for that matter, in a position that if you have these other things going on, that these are 14 03/30/04 - FINANCE - RES. 040229 the other bills that have to be paid first? Do you understand where I'm going with this? I don't know even know if you could do it legislatively, but there has to be a way that prioritizes these things.

I think there are a couple of answers. First of all, to your point about your mother and the senior generation, they are the bulk work of PGW. They are our backbone. They pay religiously and on time. You're absolutely correct. It would certainly be our understanding that they forego other things to pay their gas bill, even given the sizes of those bills. Let me come back to your question about what can be done. Let me tell you what we are doing. We have shifted our approach to our collections to be very aggressive. At the time that someone starts to be delinquent, in that first 10 days after they haven't paid their bills, they get a phone call from us. We have called 125,000 customers over the last several weeks who were in that category and they are now paying much more currently. We 15 03/30/04 - FINANCE - RES. 040229 know that from our numbers. In other words, we're trying very hard not to let them slide into a more delinquent category. Does that distinguish between those who can and those who can't? It does to the extent that if they cannot, then they are requested to make a payment arrangement and hold to that arrangement. And we now have discussions with the PUC that say someone gets one arrangement and that's it. One of the problems that we've had historically in terms of the gaming is that there were multiple arrangements over time.

Do you happen to know if the PUC, when these cases come up in front of them about the notification that your service will be cut off, do they take into consideration any of the other areas that I've covered, about looking at the customer to say, "Well, you obviously had the means to pay for something if you're paying" -- again, I'm using cable TV as an example -- "if you're paying your cable TV," which is in my opinion a luxury. Why wouldn't you be paying 16 03/30/04 - FINANCE - RES. 040229 something that is a necessity? When they make determinations on the ratepayer's ability to pay or conditions for payment plans, is that taken into consideration?

The difficulty with the PUC arrangements that we have and our concerns with it is that it's very much what the customer himself says he can pay. There are no proofs offered. It's very difficult and very expensive, particularly when you have tens, upon tens, upon tens of thousands of customers who fit into these categories, to essentially be policemen. So the difficulty with the implementation of these programs is that it's very much an honor system, and we are very much beholden in that regard. Our answer to that is to begin the shut-off process almost immediately. And if you're going pay, we get you before we shut you off. If you're not going to pay, then we want you in an agreement with the company. It's that way that we can control this. But the PUC only relies on the representations of the customer over the phone. 17 03/30/04 - FINANCE - RES. 040229

Thank you. Thank you, Madam Chair. No further questions at this time.

Thank you very much. Councilman Kelly.

Thank you, Madam Chair. First of all, I want to apologize to our Madam Chair and the rest of my colleagues and to you too, sir, that I wasn't able to make the meeting, the previous meeting which you testified. What I would like to do is go back -- and you probably have even answered this. It's in regard to your letter dated February 17th, this particular letter, and it goes to the senior citizens throughout the City. And what it's asking them to do is to bring identification and documentation to your field offices. Are there any provisions that you made for seniors who are probably up in years, maybe 75, 80 years old, that may be single 18 03/30/04 - FINANCE - RES. 040229 women that probably don't drive? Are you making any exceptions to that rule? I know the intent of the letter and I agree with the intent, but I just want to know what provisions are made for people who unfortunately cannot get to one of your locations.

Councilman, after our first experience, we had put into effect, to answer your question specifically, visits to homebound seniors. And that can be fairly broadly defined. We don't have the resources to go out to everybody. But what we ask is that they self-define themselves as homebound or that they're the recipient of some kind of service, like a home-delivered meal, so we have some idea that they are homebound; In which case we are arranging home visits. My records show that we've made 74 field visits thus far to people who could not get to one of our centers.

I'm just amazed that none of your centers are located in Northeast Philadelphia. Is there any reason 19 03/30/04 - FINANCE - RES. 040229 for that?

Yes. There was a center there until about two years ago, and it wasn't economic to maintain. It was very underutilized. What happens occasionally is we get one of these special programs that comes along and we have to make alternate arrangements, and we're looking right now into a temporary office. Before we send notices again to the Northeast, we will have a temporary office in place that can receive people in the Northeast.

I would like to see at least two, one on each side of the Boulevard, if that's at all possible. I really would like that.

We understand your concern.

And going back to the office that you closed. You say it's underutilized, and perhaps so, but I had the occasion of going in there just one time, and it was a simple matter of just changing my 20 03/30/04 - FINANCE - RES. 040229 address. You had over 35 people waiting to be heard by two of your employees who are listening to different tales of woe, I guess, of why people couldn't pay their bills or whatever. You had five people up by the payment windows just standing around. And I was just wondering if it would have been a good management decision at that time to remove maybe two or three of them to help out those two individuals who were servicing the people with other problems with PGW? That's probably one of the reasons why you closed it, because probably more or less the people up in that vicinity probably pay by mail, their bills. I was just wondering why you didn't at least take a few of those people that normally would be handling the payments and put them into a service position.

I don't know when you were into the center last.

About two years ago.

We have done a lot to 21 03/30/04 - FINANCE - RES. 040229 streamline our efforts and operations at our district offices. In that instance, it was absolutely the low volumes of total people, bill-payers and not, that were going through that we closed that office, and we closed the one near us, near Temple.

But when would you plan to put two temporary offices, or at least one, anyway?

We're looking into it right now. Before we do anything further with the senior citizen notifications in the Northeast, we will have something in place.

I know my neighbor who is probably in her mid-seventies or whatnot, she does drive, but evidently she has to drive down to 4400 Frankford Avenue, and that's quite a haul for her and probably many other people who have no idea where that office would be located. So the sooner you do that, I think it's going to be a big benefit for you as well as for the seniors who have to travel down there. There's a lot of other questions 22 03/30/04 - FINANCE - RES. 040229 that I have, but this isn't the meeting to address those concerns. It has a lot to do with the overall operations of PGW. And I think I'll wait to another day to address them. There's a lot of questions and a lot of, I think, management decisions where probably I would say they're questionable. But at this point, that's all I wanted to address was that issue for the senior citizens. Thank you, Madam Chair.

Thank you, Councilman. Remember, we have two other resolutions that will be coming, in addition to the one on the senior citizen discount and the Capital Program we're hearing now. Councilman Rizzo.

Thank you, Madam Chair. Good afternoon.

Good afternoon, sir.

You just described a process that I think created PGW a 23 03/30/04 - FINANCE - RES. 040229 lot of unnecessary controversy. It created elected officials, I believe, some unnecessary controversy in reference to the way you handled the Council notification. I think it would have been helpful -- and I'm not second guessing you -- I think you really split hairs on your definition of notifying Council waiting for it to be approved. After the many Members of Council's displeasure with this arrangement to charge the ratepayers that pay their bill, are you in a position today to have some second thoughts about that and maybe pull the plug on that idea? I think that after all the heat you've taken -- no pun intended -- that this doesn't seem to be a good idea. You did say that it was your idea.

Yes.

And knowing that there's so much controversy and you have very little support here, if any that I know of, to do something like this and the fact that you've -- I don't want to use the word manipulated us a little bit -- you went to the 24 03/30/04 - FINANCE - RES. 040229 regulator, You asked for approval, then you believe after you have it in place you come here and tell us that you've gotten the nod. Are you having any second thoughts about this at all?

Second thoughts on my proposal, no. I have no second thoughts about this proposal. I have been testifying, proposing these kinds of answers for customers for 30 years. Understand that before I came to PGW, I was a witness for consumer interests across the country. Part of my expertise is to know how regulators respond to the kinds of issues, particularly this kind of an issue as it's presented to them. There are three answers to this problem. One is to go to the General Fund; that's not acceptable. Two is to seek a permanent rate increase; I think that's excessive. This industry is so dynamic right now, there are so many changes, there are so many issues that go up and down that the only right answer that I could determine and 25 03/30/04 - FINANCE - RES. 040229 propose to our board and to propose to our stakeholders is a flexible clause mechanism. We are not alone in the country proposing this. I know there's been criticism that it shouldn't be in Pennsylvania, but I testified the other day, Ohio has a very parallel kind of proposal, Georgia, Virginia, where there is a sensitivity to the fact that people are not paying their bills. This flexible approach, I think, has a great deal of merit and is gaining ground.

So when you either get the nod, the process, will there be hearings?

Yes.

There will be hearings on this one proposal?

There will be detailed hearings starting in June on this proposal in Harrisburg, or I guess they may be here on Spring Garden at Broad.

So if we write letters in opposition to the Chair of the 03/30/04 - FINANCE - RES. 040229 Public Utility Commission and the members -- I assume that's appropriate -- suggesting that the ratepayers do the same thing, would be appropriate, expressing themselves to the Commission?

Absolutely. It is absolutely appropriate.

Now, let's assume you get the nod. They tell you to go for it, what do you plan to do?

Well, as I testified just a moment ago, I want to have some mechanism in place, this clause mechanism in place, that in the event that people don't pay their bills, that the future of PGW isn't put at risk. We have fiduciary responsibilities, the management and the board of PGW. Interest payments must be made on bonds. We have a billion dollars worth of outstanding debt. We just can't blithely say that we can't provide for the people that have put up a billion dollars' worth of money to buy our securities. We must provide certain assurances to them 27 03/30/04 - FINANCE - RES. 040229 that the company will survive. And that's what this is about. My first argument and my first requirement is that we go out and get the people who owe us the money to pay us the money. That's the first line of defense for this company, and that's where we are going. Now, if for some reason that fails or is not as successful as it needs to be, then we implement the mechanism. So it will not be until sometime in August that we'll have to make a final decision as to whether -- assuming for purposes of the conversation that the PUC has approved this by then. It will be some time in August that we'll make a decision as to how to proceed with this clause.

Okay. I don't believe you were as clear about this as you could have been on how the process will work. And if you were, I apologize. Because I don't remember you talking about ratcheting this thing if absolutely necessary. So what I'm hearing is that you have a successful collection process. You've got 28 03/30/04 - FINANCE - RES. 040229 this weapon of mass destruction there, if you need it.

That's all.

And depending on the success or failure of the collection process, is there a minimum number of bill 8 cycles that you would think that this would be implemented so it could come and go?

Well, it would come and go on an annual basis, not on a monthly basis or weekly basis.

So the minimum would be a year?

Yes.

Or depending on the Commission? The Commission could kind of time this thing too, am I correct?

The Commission could modify the proposal in some ways. That's what these hearings in June are probably going to focus on. First of all, they'll focus on the assumption that it's there, because there's no 25 argument unless you assume it's there. But 29 03/30/04 - FINANCE - RES. 040229 then, how does it operate? How does it get implemented and so forth? Those would be legitimate topics for the various parties, and there will be any number of interveners in this case for those parties to decide and to make recommendations on.

So to end my questions, if you wanted to, you could pull this proposal off the table at any time?

I want the mechanism in place. We can choose to use it or not use it depending upon the success of the collection effort. I think it's very important to understand that this mechanism is designed only to give us enough cash to stay alive. It does not give us the cash to improve the company.

For the record today, then the mechanism -- assume you get it, I'd like to know what input Council will have in you pulling that trigger?

I said this the other day. This is the Administration's responsibility to run the Gas Works and to 30 03/30/04 - FINANCE - RES. 040229 provide the amount of rate relief and the amount of revenues and the amount of liquidity that will keep the company viable. I indicated to the Chairwoman that I would certainly come back to Council and consult with Council explaining to you where we are with the process, either we don't need it or we do need it and we need it for these reasons.

But what I'm hearing is, if you get the mechanism, you need it, you're going to use it?

Councilman, I don't know what else to do. If you are willing to commit General Fund amounts to save this company, then I will throw it out the window.

You listed three things, and one of the things that I think that could have been a fourth, how well is the company being managed, how are you buying your commodities, all those things. I think that would be an interesting fourth, that the company, in your opinion, is running as efficiently as it can be run, is it staffed 31 03/30/04 - FINANCE - RES. 040229 appropriately, et cetera, et cetera. I think that's another very important part of the list.

I think that's a fair observation. Just for purposes of conversation now, my response is, we do a very good job of buying gas. Gas is 55 percent of our costs. In this quarter that we're evaluated against other utilities, we're the third best buyer of gas in the state out of the eight utilities. That says that we're not doing a bad job. In terms of cutting costs, we have cut 300 positions since I came four years ago. We are continuing to cut costs, even in the face of an enormous number of additional responsibilities that are being laid on us by the PUC. In the face of those kinds of requirements, we're continuing to reduce staff. We understand our responsibilities here. So I think there will be this part of the conversation, this fourth option that you say will be part of the hearings in June 32 03/30/04 - FINANCE - RES. 040229 at the PUC. Clearly, I understand that that's coming. But that does not get me the cash and doesn't get the company and the stakeholders the assurance that PGW can continue. That's the issue, PGW's survival. My position is that we've got $260 million on our balance sheet right now that's owed us, and we have to go after it and get it.

Thank you. Thank you for that opportunity, Madam Chair.

You're very welcome. Let me note that we just received, in addition to all the crime problems we have -- this is an aside. We had a five-year-old and a nine-year-old on 33rd Street in my district, I understand, who passed away from overdose, five and nine years old. So these are bad times. Drug overdose. Councilman O'Neill.

Thank you, Madam Chair. This finance part of the hearing was 33 03/30/04 - FINANCE - RES. 040229 going to be just about the senior citizen resolution that we continued last week. So I'm going to ask that after a short amount of discussion on the senior citizens, that the Finance Committee recess and allow Transportation and Public Utilities to get in, and they'll get into the two other resolutions. I know Councilman Cohen is going to be chairing that meeting.

Let me note before you begin, Councilman, that all of you will see we have both Committees here. Councilman Cohen also has a quorum with Councilman O'Neill on both, Councilman Kelly too, Councilwoman Miller and yourself. You also have a quorum here. And so that will be fine and help move us forward. Thank you, Councilman O'Neill.

Councilman Kelly got a little bit into the senior citizen audit situation. And I've gotten some good information in the last week on the reason why we're trying to do it. It's been six years without an audit. Normally they're done 34 03/30/04 - FINANCE - RES. 040229 annually. But it also seems like with limited manpower we're trying to catch up in three months, which is great for the company maybe, but very bad for the people out there. It's one thing to say homebound seniors. Well, a senior can be homebound that can't come out, and I believe that is what your target is. There are many seniors that can get out of the house, but it is an absolute hardship to get to 4400 Frankford Avenue for many, many reasons. I won't go through the litany of stories that have come down. I was going to talk about the mini City Hall that could be used at Welsh Road and the Boulevard. Your own mobile office that is used for LIHEAP that has computers on it hasn't been offered yet. In checking with the Water Department -- and, Mr. Knudsen, if you're going to care about your customers, and these people all pay, this is not anybody that's in the group that is scamming you. The Water Department puts out a nice little piece on their discount. And they also have what 35 03/30/04 - FINANCE - RES. 040229 you're going to have soon, hopefully, an income limit. So you don't have to right now deal with number four, which is the income part. But Number One, 65 or older, you have to prove it. It explains very nicely proof of age and ways of doing it. Secondly, live at the address listed on your application. Two, have the water and sewer bill in your name. In your case, it would be the gas bill. It is a simple application. It's less simple if you have to show W-2 forms or something, but if you take off number four, deals with the income, proof of income and all the different things that might be included in that, this is an application. That's all it is. I'm going to ask, along with the Capital Budget, this hearing be continued so you can really look in to having an application for seniors. People that are in that audit that aren't 65, but had a family member who died, they're going to fall off the 36 03/30/04 - FINANCE - RES. 040229 chart. You don't have to worry about them. They're not going to actively get in trouble over not paying percent of their bill. But 5 the widows, which is mostly what we're dealing 6 with, very high up in years, very unable to 7 get around, can do this. I'll send my staff 8 out to help them fill it out if they have a 9 problem. I can guarantee you I can do that. 10 It is absolutely wrong to require people to 11 come down. 12 If they take three pieces public 13 transportation, it's going to take them two 14 hours. They could wait two hours in line. We 15 have people who get dropped off. People wait 16 for them for two hours and have to leave. 17 They have to take a cab back. Everything 18 under the sun. We have people calling every 19 day to see if anything's been changed. 20 They're mostly worried about the 30 days. So if you can tell me that the 30-day -- the initial group that's kind of caught up in this, and it's only the initial group -- won't be hindered by the 30 days if they're legitimate discount recipients, and if we 37 03/30/04 - FINANCE - RES. 040229 could seriously check this out and get an application out in the mail. You're wasting good resources. People who could be collecting bills for you that are involved in this audit program, your staff, I think they could be better used. And the seniors could be treated with much more dignity and respect.

I appreciate your comments and take them quite seriously. And we are looking into a whole series of ways of simplifying this process, particularly for that group in the Northeast.

I don't think you can simplify City-wide any more than this. The Water Department thought of it. The Revenue Department handles it. I will let you get back to me and not take any more time. I think it will solve everything. Thank you.

Thank you very much. The Chair also notes that Councilman Ramos is here and has been here. 38 03/30/04 - FINANCE - RES. 040229 Are there any more questions on either the Capital Program or the Senior Citizen Discount? Councilman Cohen, are they on the Capital Program or the senior discount?

Yes.

Councilman Cohen.

Thank you. What happens in the worst of all cases? What happens? Suppose PGW runs out of money, what's the responsibility then? Suppose your ideas don't work. Suppose our ideas don't work. We're out of money. What happens to gas service in Philadelphia?

Councilman, I don't have the answer to that. I don't think it can be allowed to happen. So I'm assuming that there would be some recourse to the General Fund.

Wouldn't that recourse be that the City of Philadelphia would have to take it over?

Yes. 39 03/30/04 - FINANCE - RES. 040229

And isn't that the recourse because of the situation that actually PGW as a company is, in fact, a fiction, and it's a collection of physical facilities carrying on services in a different way than the Water Department does because there's no effort to treat that as a water utility? Even though our water utility, as I understand in the State of Pennsylvania, but this PGW, the responsibility goes back to the City, right? And the bond responsibility would be the City's?

The recourse would be to the City, that's absolutely correct, in the event that we are not able to keep a viable entity going.

Well, isn't the real concern here by some people, that for some reason -- and it's not clear to me why, because nobody states it -- why is it important to have a separate PGW instead of having the City of Philadelphia take over the operation? I agree with you. The City of 40 03/30/04 - FINANCE - RES. 040229 Philadelphia cannot permit a situation to develop where there's nobody supplying gas, whether we'd sell it to somebody in the form of separate buildings or whether we continue the fiction that it is a separate company and try to sell it as a company or take over the job ourselves. I don't know. There would be a responsibility by the General Fund, but isn't that our responsibility now?

Councilman, I don't think the governance of PGW is the controlling factor here. We have a huge population who have great difficulty paying their bill. Whether it's an assembly of assets at Ninth and Montgomery or whether it's some other legal form located across the street is not going to change the reality for this company. It is --

Not the reality of the company. It may change the reality of the company's existence, but it's not going to change the reality of the responsibility of the City of Philadelphia to see that there's gas service. 41 03/30/04 - FINANCE - RES. 040229

That's correct. Ultimately it is the City's responsibility.

See, I think you're moving us in a direction because you exclude us from making decisions. You excluded us from making the original proposal of the PUC. And all of your repartee with Members of this City Council, you seem to express it as your responsibility. Well, I think we ought to relieve you of that responsibility. To me, it's not your responsibility. It's the responsibility of the City of Philadelphia to see that proper steps are taken to guarantee continued service of gas. And for you to act in a way that seems contrary to the overwhelming feeling of the City Council -- I can't speak for the Mayor. I have no idea what his feeling is. But for you to adopt that attitude, I don't understand that. It makes no sense to me. So why don't we just assume our responsibility? The City of Philadelphia, I'm sure, is going to see to it that there's no 25 cessation of gas service. And I think you 42 03/30/04 - FINANCE - RES. 040229 create a problem when you speak that way, because I've never understood why you seem to feel that if something happens to PGW as an entity, then we can't serve the people of Philadelphia. Of course we'll serve them. We serve the people of Philadelphia with the Water Department without any separate utility designation for them. It seems to me we have a run-away department. You've heard many separate criticisms here about different inefficiencies that Members of this Committee and Members of Council feel exist. You see a practically as united a Council as I've ever seen on any issue. They seem united. I haven't heard a single Councilmember on this Committee, certainly during this hearing, say that your idea is the way to go. If questions are raised, they're raised trying to convince you that you did the wrong thing by acting without the approval of City Council in making this proposal. And two, if you're interested at all in maintaining PGW for whatever reason, it 43 03/30/04 - FINANCE - RES. 040229 would seem to me that your answer should be easy and say you don't want to do anything that is violative of the thinking of City Council. Otherwise, I think it's clear that we've got to take an action that we can live with. And I don't think we can live with this action. So I'm just in a quandary. You seem to feel you have a special responsibility of maintaining a company that exits only in paper. It's not really a company. We get rid of all the heavy expenses maybe that you're involved in in complying with PUC. We would take away the control of the PUC and restore it to where it belongs. This is a Philadelphia-owned -- whatever it is, it's owned by Philadelphia. It serves basically only Philadelphia's gas. Harrisburg seems to think it has the right to take it away from us. I think that's a real role in trying to destroy the City's ability to serve gas. So we solve all of our problems, except the main financial one, by having the City of Philadelphia take back full control. Then we can decide what to do once 44 03/30/04 - FINANCE - RES. 040229 we get the funds together, whether we want to reconstitute a form of a PGW or something else. I don't think you ought to be making these decisions. I think the Council and the Mayor together are the ones that make this decision. And so I certainly am not going to be supportive of your efforts to keep Council out of the picture. I don't know what you do as far as the Mayor is concerned, but you're just telling Council to butt out, you think this is necessary and you're going to have it your way. I don't think that's the right approach, nor can it work. Thank you, Madam Chair.

Thank you very much. That will conclude our questions on the Senior Citizen Discount and the Capital Program. We're going to recess until after testimony is taken before the Committee on Transportation and Public Utilities. We will take the liberty for Councilman Cohen, who is Vice-Chair of that Committee, to ask the Clerk 45 03/30/04 - FINANCE - RES. 040229 to read the titles of Resolution 040216 and 040149 that are before his Committee and then turn the discussion over to Councilman Cohen.

Thank you.

You're welcome. - - - - 46 03/30/04 - TRANSPORTATION - RES. 040149, 040216

Resolution 040149, a resolution authorizing the City Council Committee on Transportation and Public Utilities to hold public hearings to investigate the proposed gas cost rate increase to be effective September 1st, 2004, requested by the Philadelphia Gas Works with the Public Utility Commission, and in furtherance of such investigation, authorizing the issuance of subpoenas to compel the attendance of witnesses and the production of documents to the full extent authorized under Section 2-401 of the Home Rule Charter. Resolution 040216, a resolution 16 authorizing the City Council Committee on Transportation and Public Utilities to investigate and hold hearings on the petition of the Philadelphia Gas Works to the Pennsylvania Public Utilities Commission to establish a Cash Receipt Reconciliation Clause in order to reconcile PGW's projected and actual cash receipts with billed revenues on an ongoing basis; the causes and necessity for a CRRC; and further authorizing the Committee 47 03/30/04 - TRANSPORTATION - RES. 040149, 040216 to issue subpoenas and other such process as may be appropriate to compel the attendance of witnesses and the production of documents in furtherance of the investigation to the full extent authorized by Section 2-401 of the Philadelphia Home Rule Charter.

Thank you. I'd now like to ask Julie Chapman to serve as the clerk of the Committee for purposes from this point on. She's prepared a witness list. A short time ago Councilwoman Tasco reminded me that there were many witnesses that had been present at the earlier hearing who waited a long time and didn't get to speak, and she thought it appropriate that they be recognized and be permitted to speak first. So I'd call on Ms. Chapman to call the witnesses. I understand we're honored by the presence of District Attorney Lynne Abraham and by Lance Haver, the City's Consumer Director, and Reverend Bruce Edwards of the Urban Leadership Council, and Mr. James Royal 48 03/30/04 - TRANSPORTATION - RES. 040149, 040216 of the Community Rebirth Organization Plan. Now, they would be the first four witnesses, as I understand it. Would the District Attorney approach? And we're very sorry you've been held up by the earlier testimony, but we're very pleased that you are here.

Thank you, Councilman Cohen, I appreciate it, and Members of the Committee. This is the first time I've been in Chambers since the flood. If this is what it produced, it was a good flood. Unfortunate, but good. I think actually the temple of the City ought to look beautiful because this is the public's building, and it ought to look like what it is. I'm pleased to be here. And I thank the Committee for not only inviting me the other day, but inviting me back because the schedule did not permit my testimony. I'm really in here in two capacities. One is as a ratepayer, as we are all; and the other is as a public official. I was actually pleased to have had 49 03/30/04 - TRANSPORTATION - RES. 040149, 040216 the opportunity, Councilman Cohen, and Members of the Committee, to listen to the previous speaker because actually the first statement that I was going to present to the Committee came as a result of an extensive investigation the District Attorney's Office conducted from the grand jury of 1999. And actually, today's hearings and the issues that are caused by the proposed rate increases were actually consistent with in law, the doctrine of foreseeability. If there ever was a circumstance that absolutely was predictable and foreseeable, this very day and other days that may follow were absolutely predictable and bound to happen. Let me just quote, if I may, from our grand jury report, which I've previously provided to Council. And it speaks to, Councilman Cohen, your previous statement. And I quote from , Roman numeral, of our report. "Although PGW is wholly owned by the City, it is not subject to the rules and procedures that govern City departments. Instead, PGW is governed by a volunteer board 50 03/30/04 - TRANSPORTATION - RES. 040149, 040216 and an executive management team hired by the board, and is subject only to whatever policies the board or the management team may choose to enact. While a particular board or a particular executive may institute a policy, the next board or the next executive may just as easily change that policy. " Thus, what is unacceptable at city departments may nonetheless be acceptable at PGW. Indeed, several public officials have condoned it as, quote, how business is done. Some of the PGW's executives, in this instance was excessive spending, was done. While from our perspective this spending amounts to plundering, squandering and looting, nonetheless it is not criminal because the policies of the board and the management team in most instances permitted or sometimes encouraged it. In that regard, Councilmen and Councilwomen, several issues arise and they all regard to how this entire facility is run. 51 03/30/04 - TRANSPORTATION - RES. 040149, 040216 Who operates it and why it is operated. We all know that the municipally created non-profit corporation called the Philadelphia Facilities Management Corporation is the operating entity. Oversight is provided by the Philadelphia Gas Commission of that entity. The problem really arises as to what has happened in the management of this organization over the past number of years. It's not just today or yesterday. In 1999 and 2000 when our report came out, we found shocking ways that the Facilities Management Corporation and the Philadelphia Gas Works, for want of a better term, was carried out. Obviously, the debt was unbelievably enormous. It was supposedly, according to testimony presented to us, $1 billion in debt then and, obviously, the expenses were just fantastic. As of 2000 when our report came up, this report indicated that PGW had 18,073 employees; 463 of them being exempt employees and 1,410 being union members. And obviously, this is not a slight to either unions or 52 03/30/04 - TRANSPORTATION - RES. 040149, 040216 exempt employees, but it's a tremendous number of employees with virtually nobody in Philadelphia knowing what they're all doing, how efficiently they're operating, how they're conducting themselves.

For example, when I speak of the train wreck that was absolutely foreseeable from Fiscal Year 1995 to 1997, according to our investigation, $37 million a year was written off. So for those three years, because people weren't paying their bills and nobody was collecting them, that was $111 million right there. In Fiscal Year 1998, $51 million was written off because people weren't paying. In 2000, it was $63 million that was written off. And if my math is reasonably accurate, that's $225 million. I think where anybody came from in this Body, that's a lot of millions to just write off. And if one then adds the numbers, just in round figures, and assuming that the same rate of non-payment is still current today as existed even in 1998 figures, 50 or $51 million, that adds another $150 million 53 03/30/04 - TRANSPORTATION - RES. 040149, 040216 from 2001, 2002 and 2003. That's $375 million total just written off as uncollectible, or more likely non-collectable. The newspaper quoted the company saying that it controlled only $50 million or 6 percent of its expenditures per year. At 59th and Addison where I came from, $50 million is real money. Here are some of the findings that the grand jury found and published in this executive summary, which has previously been made public. And except for the fact that it is dated from the year 2000, it would be instructive, depending on what has happened then, if any meaningful reforms have occurred. As of that time, 2000, the public relations department had 15 people in it, 65 people for caller customer services. R. and 65 customer call service representatives, of that number, 39 answered the telephones. That's a lot of people who were calling or trying to find information from PGW who never got answered. PGW has its own medical department. 54 03/30/04 - TRANSPORTATION - RES. 040149, 040216 Now, bear in mind that PGW is located only a few blocks from Temple University Hospital, Just a few blocks. So they have a part-time doctor for the executives. They pay part of his malpractice insurance plus his salary. They have nurses and a clerk. So besides paying the doctors, part of his med malpractice and, of course, it pays him to attend conferences to better take care of the people at PGW. They buy medicine. They have an occupational and health unit. They offer Blue Cross plus HMO coverage as of the time of our investigation. And we questioned then and we question now why do those people who work at PGW within a very few blocks of one of the best hospitals in the City need a medical department, need all that coverage, all that money, which is money that we determined to be not put to good use. If you need a physician or you need a physical, you just trot on over to Temple University Hospital and whatever your coverage is, that's what it is. To have a full-time staff of five people or four people there is pretty fantastic. 55 03/30/04 - TRANSPORTATION - RES. 040149, 040216 The grand jury also found that millions could be saved in outside counsel fees. While we expect that lawsuits are always going to be brought against a public utility, something goes wrong with the gas line and there's an explosion or some other catastrophic event, we understand the cost of litigation. 6 million in 1999 for outside legal counsel. I think that's something that really needs to be looked into. In addition to that, the 500 exempt employees also have a legal services plan, which will, at taxpayer expense, draft wills, handle real estate matters, and handle even uncontested divorce cases. All of the retirees, at least as of the time of this report being written, had a $9 million a year expense for lifetime health benefits for its retirees. Nobody in the City of Philadelphia gets lifetime health benefits unless you have an insurance policy. So even though they have no obligation to do so, PGW has assumed the 56 03/30/04 - TRANSPORTATION - RES.

040149, 040216 responsibility of giving lifetime health benefits for all of its retirees. Of course, the poor debt collection ration has been, I'm sure, well spoken of in this Body depending on which witnesses came through. Obviously, the issue of how this community is run was based on financial records, and the financial records were in a shambles. It took the District Attorney's Office grand jury almost a year to find even what condition the utility was in because their financial records were in such horrible disarray. It's been poorly run, poorly managed for years. They had many, many consultants. They pay exorbitant relocation expenses for their new employees. And because employees are not public employees but employees of a private corporation, they're not subject to public official and employee ethics acts. And even though customers may choose another gas commodity supplier, PGW still provides the distribution to all Philadelphia customers. So by any measure of anything, this 57 03/30/04 - TRANSPORTATION - RES. 040149, 040216 is a company that has been in disarray for years and years and years. Part of the investigation did contain many, many pages of lavish expenditures for the executives. And the defense was -- and it wasn't criminal, but the defense was that we're going to run this company like a major corporation. Well, with all due respect, the City pf Philadelphia is really the owner of this agency. It's very difficult to justify. In other words, should this facility be run as a department of the City, with an encumbered budget presented to City Council every year, who would then appropriate a certain amount of money, as they do for any department, including mine, in certain classes of expenditures with personnel services, supplies and equipment with no power to spend out of class without a transfer ordinance; all contracts for services over a set amount would have to be sent to the Finance Department or a for-purchase order for equipment or to the Procurement Department. Because PGW operates off its own revenues, which don't pass through 58 03/30/04 - TRANSPORTATION - RES. 040149, 040216 the Gas Commission and through the City government, this creates a system that's ripe for abuses and misuse of money. The Water Department, on the other hand, does go through the City revenue stream, so at least there's an outside that if everybody is doing his or her job -- and we expect that they will be -- the spending or the method of spending and what it's being spent for would be regularly watched and supervised. The way PGW, the grand jury found, was run at that time in 2000, no one has control, neither Council nor Controller nor the Commission. It's spends off budget willy-nilly. It has all kinds of issues and problems and it has no budget oversight and no 19 efficiencies and never really encouraged. So I believe, for example, that the Finance Department, which computes the payroll, the Treasurer could issue checks every two weeks, for example. PGW handles its own checks and payrolls and pays every week. That's an expensive proposition. So a 59 03/30/04 - TRANSPORTATION - RES. 040149, 040216 combination of, let's say, the Water Department and PGW could and perhaps should merge some of their functions. After all, they do some of the same things; dig up streets, replace lines, collect fees for water and/or gas. And obviously, we could combine payments, procurements, payroll, contracts and watch outsourcing. I don't have a dog, so to speak, in the hunt with regard to whether the City should keep it, sell it or do something else with it. That's something that you ladies and gentlemen are going to have to make the decision about. But it seems to me that after our grand jury spent two years investigating all of these things and noted the tremendous problems that were totally predictable and where we find ourselves today, I believe that a lot of this could have been prevented.

It could not have prevented the gas rates from going up. Gasoline and gas rates go up whenever they go up. And obviously, people are going to bear the brunt who are paying. It is curious to me -- and I'd like 60 03/30/04 - TRANSPORTATION - RES. 040149, 040216 to know because I don't know what the fact is -- I don't know whether the plan, for example, to have ratepayers who are paying for the people who aren't paying is a new idea or something that's already in place. And I have a sneaking suspicion that ratepayers, probably to about or percent of their bills, are 9 already covering people who don't pay. And I 10 don't believe anybody -- and it's just my 11 observation, I was sitting here listening. 12 That the idea was touted as a new idea isn't a 13 new idea at all, is my suspicion. I truly 14 believe that as a ratepayer I have been paying 15 and you have been paying and all of the people 16 who have been paying have been paying for the 17 write-offs or the deadbeats, if you want to 18 call them that or the people who aren't 19 paying, are paying for the people who aren't 20 paying already. 21 This is now just another insult to 22 the ratepayers who are paying, and actually an 23 invitation for people who aren't paying to 24 continue not paying or to stop not paying 25 because where else could you get a deal like 61 03/30/04 - TRANSPORTATION - RES. 040149, 040216 that? If you don't pay your gas bill, you're not going to get shut off. Some other poor person, some other business entity, some other taxpayers and ratepayer is going to pay for you. This is a bad solution. It's bad if it's instituted already, which I fully believe it is. And it's only going to make the situation worse. So I believe that a true investigation, if that's the correct word, or inquiry, if you will, done by City Council into just how this utility is operated from top to bottom. Whatever it is that you find, you find. It should be, in my opinion, the same kind of investigation that we did. " Yes, but it isn't a private company; it's a utility. And we ratepayers are all paying the freight for this. So I believe a top to bottom, 62 03/30/04 - TRANSPORTATION - RES. 040149, 040216 absolute open, tearing down and deconstruction of this utility needs to be done so that at least we can see what we're paying for and we can determine -- and I say we, I don't mean we in the sense of I. We as ratepayers who are paying can see, well, the poor people who really can't pay, those are people we may have to give a helping hand to. But all the other people who really can pay but don't or who indulge in luxuries, which you, I believe, Councilman DiCicco, brought up, you know, do they have a cable box with HBO and all the great stuff that they're paying $80 and $90 a month for, do they live with those kinds of luxuries and don't think it's important to pay the bill? Are they struggling just to get along? I think a sense by Council will be able to determine all of these questions from everything from the expenditures to overtime to the use of employees, both civil service and union, would be a good and a healthy thing, and it would at least lift the cloud from consumers that somehow this entity is 63 03/30/04 - TRANSPORTATION - RES. 040149, 040216 over there some place and that nobody's paying attention except when a crisis occurs. And I think that would be a healthy thing and it would be very much welcomed.

Thank you very much. I think it was an excellent statement. Let me ask you one question. In the event that Council took sound advice, and occasionally, maybe rarely, but occasionally we do, would the District Attorney's Office be able to lend help in the investigative process? Because we don't have staff to do that and we don't have the know-how because none of us have been involved in that. I think you raised originally in the investigation very important questions and you raise them now currently. There ought to be some way of getting to the end of this. I'm not drawing any conclusion but, to me, the thought was, is that why there's such an emphasis on seeking to maintain the fiction that this is a separate company -- maybe it is, maybe it isn't -- to protect the right to do things differently than the City requires? 64 03/30/04 - TRANSPORTATION - RES. 040149, 040216 And if so, that's why it's one of the important reasons why it's so expensive. But would your office be able to assist us in any fashion? Because there's no 6 sense in our saying, "Well, let's investigate," and then find we don't have the means of doing it.

Well, obviously, Councilman, we did this for almost two years and we found very disturbing things. Our ability to assist Council depends on a whole lot of things. And as you know, we're facing a budget crunch, as is everybody else. And I'll be here to talk to you about my budget later on. The short answer and the honest answer is, if my budget is cut the way it's proposed to be cut, the answer is no. You're going to have to get that money yourself. And even if my budget isn't cut, to take on another investigation of something we've already done with recommendations we've previously made might not be the way to go. It seems to me the better way to do things, if you'd permit me, is for you ladies 65 03/30/04 - TRANSPORTATION - RES. 040149, 040216 and gentlemen, you, the Council, to decide along with the Facilities Management Corporation, the Water Department and all the other things to really take a good, hard look at how this entity is run, what are their expenses, where are they going, what efficiencies have they put in place, what are they doing differently, how can this all operate? And this is going to take millions of dollars of looking and a lot of time. But once you, the Council of the City of Philadelphia, decides to do it, we will certainly be anxious to lend you whatever hand that we can. But we cannot take on the mantle, the burden of a City investigation in an office that does criminal investigations. We were looking to arrest, which we did, people who were breaking the law. All of the other stuff that we found out came as a result of subpoenaing records and documents to see what a shambles this place was in, how poorly it was managed, how poorly it was run, and that we thought it could be run better. But we don't have control over that. That's why 66 03/30/04 - TRANSPORTATION - RES. 040149, 040216 we presented a report and hoped for the best. But that's why today is predictable. So if you ladies and gentlemen of Council want to talk about that, we're anxious as a City department and as all ratepayers to get to the bottom and the answers that you seek. I don't know that we can lend you our aid in doing a non-criminal investigation that is more properly the provence of the City Council and its, perhaps, Law Department or somebody outside the Council whom you would like to hire to see how this operation is carried out and what's really at the bottom of it.

Councilman DiCicco.

Thank you, Mr. Chairman. Good afternoon, District Attorney.

Good afternoon.

Thank you for that very informative information that you just presented to Council based on your investigation of 1999. 67 03/30/04 - TRANSPORTATION - RES. 040149, 040216 I actually would ask Mr. Knudsen or someone who may be able to answer one of the two questions that I have that came about as a result of the District Attorney's testimony. In particular, I was very well aware of the health benefit package that the employees have, which I understand is a result of arbitration over the years. I understand that -- although I think in my personal opinion it may be somewhat excessive at times -- it was done in a fair and legal way through arbitration. I didn't know about the in-house, for lack of a better description, health facility. Is there anyone who can speak to that from PGW?

I think in fairness to Mr. Knudsen, he ought to have a little time to get ahold of the transcript of testimony so he can make whatever reply he feels would be appropriate.

Well, maybe I'll ask him the question. If he doesn't have the answer, I certainly would ask that he present those answers to the Chair, if you 68 03/30/04 - TRANSPORTATION - RES. 040149, 040216 don't mind, Mr. Knudsen.

Councilman DiCicco, would you ask?

Thank you. Good afternoon, Mr. Knudsen. You heard the testimony from the District Attorney. There are a number of areas that I have concerns about. But the one area that concerns me, at least at the moment, is the area where there's a health facility; there's a doctor, nurse administrators at the site of the PGW building. How long has that been going on?

I think for a very long time. It's certainly my experience it's been there over the last years. 18 I think the issue is that this is a 19 highly regulated industrial facility, and we 20 have a lot of drug testing and so forth that goes on. That's the basic reason why we have federal responsibilities under the Pipeline Safety Act and so forth and we have to make sure that our employees meet certain regulations. But that's basically why we have 69 03/30/04 - TRANSPORTATION - RES. 040149, 040216 it.

Are you saying that you're required by law to have someone on site, or do you just have to do the testing as required? Which I can understand that part of it.

No. We have actively investigated outsourcing this effort. It's equivocal as to whether there are any real benefits from doing so in terms of cost savings. To go outside is not inexpensive for the types of services that we require. I would respond with a detailed summary of those responsibilities for you. I'm giving you what I understand the situation is.

That was actually going to be my next question. Have you investigated whether it would be less expensive to outsource it as opposed to in-house? And I would appreciate some answers to that, if you could submit it to the Chair. Do you know what the cost is for the way the program is set up you have is? Is the doctor full time, five days a week, seven days a 70 03/30/04 - TRANSPORTATION - RES. 040149, 040216 week?

Yes.

Full time?

Yes.

One doctor?

One doctor, and a nurse and a half.

A nurse and a half? Because it's rotating?

That's correct.

And there's staff that go with the doctor and nurse?

This is a daytime operation. That's correct. It's 8:00 to 4:30.

And is it purely for the purpose of the drug testing or are they providing any other forms of medical assistance?

It's there for employee evaluation. I have used it on occasion.

How many tests does PGW perform on a daily basis? 71 03/30/04 - TRANSPORTATION - RES. 040149, 040216

I'd have to get that for you, Councilman, and I'm prepared to -- let me just respond. We had looked at an alternative to this and have not been satisfied with going someplace else in terms of cost or in terms of responsiveness to the circumstances that we're presented with. We have a very active requirement to monitor our employees. And let me then submit this to you as a report or some kind of affidavit that will summarize a level of detail that I don't have, and it's not present in the room with me.

That would be very helpful. As to the employee, the doctor, the nurse, nurse and a half, whatever, are they compensated -- obviously salary compensation. Are they entitled to the same benefits? Are they PGW employees or are they contracted to do work?

The doctor is contracted for services. The nurses are employees.

Would you 72 03/30/04 - TRANSPORTATION - RES. 040149, 040216 include in your report what benefits that those individuals may be entitled to based on the contract?

I'd be happy to.

Expense accounts, whatever it is.

Can I follow-up?

Councilwoman Tasco and then after Councilwoman Tasco, Councilman Rizzo.

Could I just follow-up with that?

Go ahead. Briefly.

Thank you. Mr. Knudsen, I come from a utility background, almost 34 years worth. I don't think there's a more highly regulated industry than the nuclear industry. And I believe that PECO Energy shut their medical facilities down at main headquarters 15 years ago; in the satellite offices, maybe 10 years ago. It's hard for me to believe after all the other corporations have figured out other ways for 73 03/30/04 - TRANSPORTATION - RES. 040149, 040216 drug testing and all the other testing -- I just want to add my two cents to it. There's a perfect example of status quo. Did you ever think of picking up the phone and giving Dennis O'Brien a call and say, "How did you guys phase out your medical facilities?"

Councilman, my only response is that we've looked into alternatives. We're looking for the best value for the money we spend. And we have not found an alternative. But I will submit all of the documentation in the process of this investigation. You can look at anything we have. My response to all of the comments that have been made is that we have an open book. We have been here for four years. There have been basic reforms and no area of the company has not been looked at seriously.

I understand that. And I'm not suggesting that you haven't done that. But I don't know too many corporations today that have --

Councilman Rizzo, 74 03/30/04 - TRANSPORTATION - RES. 040149, 040216 I suggest you're going to be following Councilwoman Tasco.

-- that have their own in-house medical facilities. Thank you. I'm finished.

Councilwoman Tasco. Councilman Rizzo, you may continue if you wish.

I'm afraid now.

Councilwoman Tasco, are you waiving?

Yes. Any other Councilmember have any questions? (No response.) COUNCIMAN COHEN: I think we really don't want to question too intensively. There's too many witnesses today. We'll have an opportunity to study the record and perhaps call back for a further hearing. This issue is so important I think it will take at least one or maybe more than that by way of hearings. 75 03/30/04 - TRANSPORTATION - RES. 040149, 040216 Councilwoman Tasco.

I would just like to say that what would be helpful for Mr. Knudsen to do is to prepare a response to the items that the DA has outlined since her report in 2000, to give the Council an update of what has happened and transpired since her investigation. I think that would be helpful to the Councilmembers to understand that there have been some changes in response to the DA's report, and also in response to many questions that have been asked by the Gas Commission. So I think that would be beneficial to the Councilmembers.

That's a request I made initially. I thought Mr. Knudsen would have to have some time to study the record and reply specifically. Because I think whatever happened in the past won't affect this action, whether it's an investigation or what it is. I think we've got to deal with this because there doesn't seem to be any answer. It's either a City of Philadelphia organization and it ought to obey the same 76 03/30/04 - TRANSPORTATION - RES. 040149, 040216 general principles, Or if there are exceptions they ought to be clear to those of us that have the responsibility for City policy; that's the Mayor's Office and the Council office. And so I think we're going to do our job this time, whether or not we did it in the past. Councilman O'Neill.

Thank you, Mr. Chairman. The one area -- it's probably for Mr. Knudsen rather than the District Attorney. It is an area that some people might consider theft. I'm thinking about it. There's a nerve that you hit with the -- there's no 17 question about it -- City wide with the surcharge concept. And I think District Attorney Abraham really hit the nail on the head when she said that the same people whose nerve has been hit don't realize their nerve was being hit for years because now it's just being stated publicly that you're being asked to pay for somebody who doesn't pay, where you've been paying for people who didn't 77 03/30/04 - TRANSPORTATION - RES. 040149, 040216 without knowing it, without it being officially stated to you and explained that way. What comes from these same people who pay their bills religiously and resent the idea of paying for people who can and won't or don't and get away with it -- and I see it in letters, I hear it from people in person -- is how cold and chilly their houses are and how many sweaters they're wearing or they're children during a cold winter that we had, particularly during the first half of this one with thermostats at 50, 55, 60. And some of us take for granted the 68 or 70, something we can pay for. And these people are paying their bill every month. And they know people or they know someone who knows someone -- and you can picture it. The person is going to scam you for the bill. They're not going to care if it's 85 in their house. We don't even have that under control. So not only are they essentially stealing their gas from their neighbors because they pay for it, but there's no limit 78 03/30/04 - TRANSPORTATION - RES. 040149, 040216 to how much they use. They could open their windows. Why, if you're not paying for it, would you have any care in the world about how much gas is going out the window or coming through the pipes? I don't know how you get to that, but people resent that every bit as much as the pay for the person who won't problem. Could you comment on that? I don't know how any of the other utilities deal with that. I know there are governors you can put on thermostats. Could you comment on that? Because that's something that I meant to ask earlier.

Yes. This is the most difficult issue for us. Part of it has its origins in the public policy that guides gas utilities. We have the winter moratorium. It is an open invitation for abuse. It was built on the basis of trust, that people who absolutely could not pay their bills had the opportunity to keep their homes and keep warm in their homes for the season, and then the expectation was that they would pay at the end 79 03/30/04 - TRANSPORTATION - RES. 040149, 040216 of the season. That trust is no longer operating. We know that we come out of the season, make an agreement with someone, and those agreements continuously get broken. It was only in the last six months that there was a proceeding at the PUC that resulted in what's called Frame (ph) versus PECO, wherein the PUC delineated very specifically that you could have one and only one agreement. And if you didn't honor the terms of that agreement, you would be shut off. That's what we are operating under, that particular legal guideline. Up until then, we had the problem of continuously being gamed by customers as they would break and remake and break and remake without a lot of consequence because there was an acceptance of that practice.

You haven't addressed the idea of the unlimited usage.

Well, I agree with you. If you understand you're not going to pay the bill or that somehow you're going to be able to game the system from year to year, 80 03/30/04 - TRANSPORTATION - RES. 040149, 040216 then you do what you feel -- the way you want.

You're going to have slippage no matter how hard you try, based on what you testified to. You're going to get better at it hopefully, but you're not going to get all of them.

May I speak to that for just a second, Councilman? Here's the beauty part between the electric company and the gas company. We know from our dealings with companies in Philadelphia that the gas company and the electric company have the same problem. I make an agreement with you; you break it. Then your sister Councilwoman Tasco makes an agreement; She lives in the same house as you, and then she breaks it. And then your sister Councilwoman Reynolds Brown makes an agreement and then she breaks it. And then we go to your older brother Councilman Cohen and then he breaks it. And that's the way it works. That's the successive agreements in the same households with different adult members of the household breaking multiple agreements. 81 03/30/04 - TRANSPORTATION - RES. 040149, 040216 The difference between, for example, the gas company and the electric company is when we've dealt with issues of stealing electricity, which we find in drug houses and houses that are smoke houses, which you all know about, they go out to the electric pole outside the back window and they -- for use of a better term -- sort of jerry rig a wire that they then hook into their electrical system, bypass the box, and they get free electricity. The wonderful thing about the gas line is, you go out to the street and you open the street, and to a large extent -- although certainly there are people who are capable of going out to the street and figuring out how to bypass it, but the nice thing is you can turn off the gas. And really the problem has been in a lack of will on the part of utilities because they didn't want to look like bad guys, I think, that they were being mean ogre big organizations cutting off poor Mrs. Smith's gas line. That may have been okay back then. But as a reality of today's ability to do 82 03/30/04 - TRANSPORTATION - RES. 040149, 040216 business and so that we're not bearing the brunt of all this extra expense, this passing on of other people's unwillingness as opposed to inability to pay, when the winter season is over, you go out and turn somebody's gas off, period. No bargaining. No fooling around. Just turn it off. It's like bail money when you go to court. Nobody has any bail money. Everybody is poor until you put somebody in jail. All of sudden, they come up with child support payments they haven't ever acknowledged. Traffic court tickets, boy, they pay 10,000 bucks up front or they put up whatever the amount of money is because there's a consequence. They finally see that they've run out their string of excuses and somebody's taking action. Not everybody, but in many of these cases there's money there or can be obtained, but they won't do it because there are no consequences. Unless or until the gas company runs its situation better, customers like me and like you are going to be sitting here across 83 03/30/04 - TRANSPORTATION - RES. 040149, 040216 tables talking about our rates and how this utility is run. And that's the way it's going to be. There has to be a real serious look at how PGW as a City entity, as opposed to PECO which is a private company, how we run our business. And that way we don't have to spend our time looking at criminal use of ratepayers' money and misuse and abuse and pilfering and plundering a company which is like a cash cow. It's the goose that laid the golden egg. And the goose is moribund, not dead but moribund. And it's a little late to start to resuscitate the goose. But if we kept that goose up and running for all these years, now a number of eggs would be limitless.

Councilman, just to respond briefly. As I announced last week, we are positioned, poised to give notice to 130,000 customers who are in categories that they can begin what we call our credit and collection activities, which is the turn-off 84 03/30/04 - TRANSPORTATION - RES. 040149, 040216 requirements. What is very important to understand is that we are not free agents in this process. We are governed by the laws of the State of Pennsylvania and the rules of the Public Utility Commission. There are very specific limitations on what we can do to turn people off, even in the spring season. There are six discreet notices, phone calls or visits that we must go through with each person that we shut off. Do you understand with a 130,000 potential visits, phone calls and notifications, this becomes a very expensive process for us? We are doing that.

That's why we're going to free up all your people for that senior citizen audit situation, make sure you have enough personnel.

Maybe that even makes more desirable the taking over by the City of Philadelphia and operating it as a department. That might be a way of avoiding PUC jurisdiction. Because I know it was very costly when you were shifted over to PUC. And from what we understand, the City had a role 85 03/30/04 - TRANSPORTATION - RES. 040149, 040216 in that decision. The City -- it was Mayor Rendell at the time -- let it be known that officially it was against the takeover, but that if the State took it over a certain way and gave bondholders assurances by leaving certain language alone, then it could be lived with by the City. But the City wanted to make clear that everybody knew they were officially against it. Well, I say that kind of bargaining meant the City approved it. The City was interested in guaranteeing its needs. Once that was done, that was all the City was interested in. I'm saying it may be that becoming, as the District Attorney suggested, as a possibility part of a City utility department or a separate department of the City but subject to City laws might be the best thing in the world. It's certainly something very much worth looking into. Because we can't have -- PUC was sold to the people that it's an advantage. Now you're telling us of all of 86 03/30/04 - TRANSPORTATION - RES. 040149, 040216 the disadvantages. So I think you're entitled to the answers, but I think we're required by our duties to thoroughly do an investigation and come up with a recommendation. Because we have no influence with you, Mr. Knudsen, but we may have influence with other people in reaching a different conclusion.

He's on an area that I think is relevant, and that is something you testified to last week and, I'm sure, you will be testifying many times in the future. That is that the PUC puts down rules now that you have to follow that the company didn't always have to follow because it was under the Gas Commission. We have in the City a unique situation. You have a Chair of your Commission who could be utilized to help you with Speaker Perzel, the Senate delegation, Representative Evans. These are people who have some influence in Harrisburg, particularly Philadelphia issues. They're all appointed by the Governor, I understand. I 87 03/30/04 - TRANSPORTATION - RES. 040149, 040216 think it's incumbent upon you, whether you choose to go and utilize the relationships, the longstanding relationships of your chairwoman, or go in another direction to get there -- I would recommend the former -- but that you are in such a crisis that you can't afford to just be repeating what PUC's rules are. If you firmly believe that you need relief from them or some other rules that specifically apply to the worst collection area in the state where they don't seem to work as they might in some county that has more deer than people or whatever. So I would urge you, thinking positively -- now, I tried to stay positive today using the application rather than the hatchet going after you. I think you can solve that one. And I think you can put a big dent in the PUC problem by going to people they listen to. They don't listen to you. They're going to listen to me. Councilwoman Tasco, I believe, and any one of us that she needed help from would help her -- but I don't think she needs it -- could get the right 88 03/30/04 - TRANSPORTATION - RES. 040149, 040216 people with you to sort of carry your ball at the state level. This thing is too big to let any stone be unturned.

If I may just respond briefly. We understand that and have for a period of time. We're part of the Energy Association of Pennsylvania and are now making common cause with the other utilities on just these issues. Philadelphia is not unique in the problem. We have it because it's so much larger here. But it is a problem that all of the utilities --

But you testified last week about how unique your problem is.

Our problem is unique because it is so big.

I disagree with you. Yours is unique when the other utilities are going from a half a percent to a percent and a half because of the cold winter and collections, and you're going from 8 to 12 percent. You're already at 8. They were at a 89 03/30/04 - TRANSPORTATION - RES. 040149, 040216 half a percent. You're unique.

Others are pushing 4 and percent right now. You're right. 5 There's no question of that. So we are making common cause with other utilities.

I wouldn't even work with other utilities. I don't mean to interrupt you. This is a Philadelphia problem. We've most recently been placed under the PUC. We need help at the state level as we're going to get tougher, and state rules prevent us from being as tough as we'd like to be.

Councilwoman Tasco has graciously created a mechanism for us to talk with all of the members of the Philadelphia Delegation and other political folk in Harrisburg, and that's what we are doing. We are pursuing every avenue we have right now. We have a whole series of meetings coming up in the near future.

Any of these other utilities that you speak of, are they all municipal utilities owned by the 90 03/30/04 - TRANSPORTATION - RES. 040149, 040216 government that they serve?

No, sir. They're all investor-owned utilities.

Well then they're not related to our problem at all. They have different problems. That's been my complaint about PGW over the years. I haven't known how it affected things, but there's always been an effort to treat it differently as if we're a different brand of person, different brand of service. We're a utility. Well, we've seen now what's happened when you associate yourself not with other government people, but with these private companies. And I think there's much evidence in the District Attorney's testimony that their investigation found that as a constant justification. You wanted to be a utility, and you certainly are. If you are a utility, you're a special brand owned by the taxpayers of Philadelphia. That's something you're not prepared even now to acknowledge.

No. Councilman, we have a 165 or 168-year history of tradition 91 03/30/04 - TRANSPORTATION - RES. 040149, 040216 and law. If the stakeholders or --

The stakeholders are the taxpayers of Philadelphia.

I understand. If this Body or the State Legislature wants to undo those laws, I fully respect -- I live with the law as it's provided to us.

And the law is that you're owned by the City of Philadelphia and decisions should be made by the proper bodies in the City of Philadelphia, not compared to how other utilities that are not municipally owned.

That's a fair observation.

David, I'd just like to say something. I think that we've tried to push Mr. Knudsen to be more aggressive in his push with the State PUC because -- I agree with Councilman O'Neill -- we are unique and we are different. We did begin the dialog with the State Legislature and we do have a meeting coming up with the Speaker and some other 92 03/30/04 - TRANSPORTATION - RES. 040149, 040216 members of the House and some people with the Senate because these are their constituents. So your argument can't be for other utilities. You've got to go fight for Philadelphia and for the change. I've spoken to them personally about the situation at PGW because they read about it in the newspaper and they know what the problems are. And we've talked about solutions possibly to the one issue where the PUC will not allow you to cut off in the wintertime. You can't say, "Well, other utilities do." That's their business. You're going to go in and fight for Philadelphia. Because when the Gas Commission regulated PGW, Phoenix Corporation came to us and said they wanted to be able to cut off in wintertime. We set up a process for them to do that. That's one of the pieces that you missed, Ms. DA, was that the oversight of all of this is not just the Gas Commission or the PFMC Board. The Administration plays a very strong role in the operation of this utility. And sometimes I believe -- and no one has told 93 03/30/04 - TRANSPORTATION - RES. 040149, 040216 me -- that they are hamstrung by decisions. And some were, whatever the reasons are, made by the Administration. And I will certainly tell you that the guys who were charged with -- that you indicted were told to run that company like a business. And I kept telling them it was a public utility. And I don't think it's going to come back to the City because I don't think City Council is going to decide that they're going to raise the rates. And I think it was a deliberate effort to get it to the PUC because the powers that be knew that a rate increase had to come and they did not want it on their charge. So therefore, it went to the State. So now we're governed by the state rules and regulations and have to abide by them. But I say to Mr. Knudsen that with this hearing and with the support of the Council, you've got to be more aggressive. Those meetings are already scheduled, and I have one more that we're going to schedule, until I can confirm it, to deal with some of 94 03/30/04 - TRANSPORTATION - RES. 040149, 040216 the issues around the PUC because that too is an administrative body appointed by political leaders and can look at things differently. But you have to pursue them in a different way. I have some other questions, but I'll wait until everybody else testifies and then I'll come back.

We excuse these two witnesses. They've both been here a long time. We ask those people who are sort of ordinary citizens of Philadelphia to come up and testify and then we'll go back to any other City officials. I think the public is entitled to have an opportunity to be heard. If there's a Tim Kearny here, come forward. Are there any other people here -- not who have official duties with the City. You're going to be next. Is there anybody else here from the general public? Why don't you come and sit with Mr. Kearney. Let's see if we can get the ordinary citizen who's really going to make an 95 03/30/04 - TRANSPORTATION - RES. 040149, 040216 ultimate decision. When they're done, we'll proceed with Lance Haver, Reverend Bruce Edwards and James Royal.

I'm with the citizens, Councilman.

Mr. Chairman, let me say we neglected to say, and we'll say it again later that -- maybe we said it by phone -- that we believe the company should ask the State for more money in LIHEAP assistance. That's part of the issue. So we will request that of the company.

Mr. Kearney, I called you first. Then there will be Reverend Edwards and James Royal.

Good afternoon, Vice Chairman Cohen and Chairwoman Blackwell and Vice Chairwoman Reynolds Brown, and Members of the two Committees. My name is Tim Kearney.

He looks familiar because he's been on the staff of City Council for three years until he resigned about six months ago. 96 03/30/04 - TRANSPORTATION - RES. 040149, 040216

It's nice to be back here. Today I come as a candidate for the democratic nomination for the 172nd District of the State General Assembly in this April's primary. This district includes parts of Mayfair, Holmesburg, Tacony, Academy Gardens, Lexington Park, Rhawnhurst, Pennypack Woods, Home Circle, Bustleton, Fox Chase and Pine Valley. If this seems like it's all over the place, that's the joys of gerrymandering. As Ralph Nader would say, when the voters stop picking you, then you have to go pick your voters. This district was changed very much from the way it was just recently. But I'm here to testify about PGW, the senior citizen discount and the recently proposed surcharge. I propose that PGW write a grand proposal to the Philadelphia Foundation earmarked for the Speakers Foundation, which they run. The Speakers Foundation is flushed with $700,000 from the gala black tie ball, and bailing out PGW might just be the best use of the money. First we must call the Speaker 97 03/30/04 - TRANSPORTATION - RES. 040149, 040216 because he is just now picking members of his advisory board. We must call the Speaker who will screen these applications. Given the mission of the Speakers Foundation, I'm sure he will approve our application, then the Philadelphia Foundation can rubber stamp it and we can a take a big picture with the Speaker for his local newspapers during this election year. We can all call it a charity and then we can call it a day. Now, I'm trying to be a little bit funny, but it's for a very serious reason and for a serious purpose. And I'm here as a candidate representing -- hopefully representing as a state representative -- but representing as a candidate right now about 70,000 people in Northeast Philadelphia, 95 percent of whom are PGW customers. And I would urge the PUC and the Gas Commission and City Council to do everything to maintain the old senior citizen's discount to maintain public local ownership of the Gas Works, recommend that the City forego their annual $18 million fee that they get from PGW and -- 98 03/30/04 - TRANSPORTATION - RES. 040149, 040216 I'm happy to understand that Mayor Street has decided to do this already -- to oppose the currently proposed surcharge. And also, if I was fortunate enough to get into the State Legislature, I would introduce and support legislation to return the rate-making authority of the Gas Works to the Gas Works from the Pennsylvania PUC. I also think, as I read in the newspaper and as Chairwoman Blackwell just mentioned, and I read in the newspaper today, I think from Councilwoman Tasco, I think getting more LIHEAP money is absolutely essential, and as a state legislator would support that very much. As was further stated that the State of Pennsylvania could also offer to augment that. One of the main reasons the ratepayer should not pay for the surcharge is because of the computer billing mistake which is costing the Gas Works upwards of $90 million. This is perhaps the biggest reason the City should not get their $18 million annually. Elected officials in 99 03/30/04 - TRANSPORTATION - RES. 040149, 040216 the position of power and authority should take responsibility, not just pass it off to the ratepayers. And as we all know, ultimately if PGW fails to balance their books and it's a publicly-owned utility, just as we learned when the City Council loaned PGW $45 million a couple years ago, the responsibility for PGW is going to come right back into this room. I support the winter moratorium, and perhaps this is where the means test would be more appropriate than on the senior citizen discount. If a deadbeat can pay and doesn't, then they could be cut off. In many cases it's obvious which people and which businesses can pay and aren't doing so. I appreciate the opportunity to testify against this surcharge. I would be glad to answer any questions about the PGW proposed surcharge as well as the Speakers Foundation. Thank you.

Are there any questions of Mr. Kearney? 100 03/30/04 - TRANSPORTATION - RES. 040149, 040216 (No response.)

I notice you referred a lot to the Speakers Foundation. Why?

I think the Speakers Foundation is a very, very troubling new recent development in politics in Philadelphia and Pennsylvania. We have a situation where a very reputable and historic community foundation called the Philadelphia Foundation finds itself fronting for the advisory group that the Speaker is setting up to screen the applications. According to the Northeast News Gleaner, no application will get to the Philadelphia Foundation unless it's approved by the Speakers Advisory Board, making the Speakers Foundation nothing but a gigantic WAM (ph) account for the Speaker. What makes this doubly troubling is that unlike WAMS that come from tax money or charities, now you have corporations that are giving to a charity which can't give to a politician. But now it's as if you changed law so that corporations can now donate 101 03/30/04 - TRANSPORTATION - RES. 040149, 040216 directly to a politician's slush fund, which as the way it's set up now is what the Speakers Foundation is. The Philadelphia Foundation is going to have no decision-making authority over the grant making whatsoever. And I think that when the IRS investigates it, I think we're going to find that the Speaker's Foundation will be withdrawn.

And in the district that you're designated as the district you're seeking election, who is the current incumbent?

The current incumbent is Speaker John Perzel, who recently -- I think the Speaker's Foundation is a continuation of the type of troubles that Speaker Perzel finds himself in. Just recently we saw where Speaker Perzel charged the taxpayers 50, $60,000 for a DVD that he made about his swearing in ceremony. When the press called him on this last August, his chief spokesperson said that it was a mistake and it was an oversight and the campaign account was going to pay that and 102 03/30/04 - TRANSPORTATION - RES. 040149, 040216 they would do it right away. After the campaign finance reports were done on December 31st, the Inquirer found that he didn't pay it back. Then he paid back half of it. And then only after three columns were written did he finally pay back tens of thousands of dollars of postage. The Speaker has shown the public that he misused taxpayers' money to pay for that. And as the column said, it was nothing more than a slick campaign mailing, that it was anything but historic. He mailed it only to his constituents, and not to libraries or historic societies. There's nothing historic about another white man becoming a speaker.

Thank you. Any other questions? (No response.)

If not, thank you very much for appearing here today. The next speaker will be Reverend Edwards.

Good afternoon, sir, and to your colleagues and fellow Committee people. I am, as always, when I get 103 03/30/04 - TRANSPORTATION - RES. 040149, 040216 an opportunity to come here and dialog with you, fascinated by the process, interested in the debate and prayerful that out of it comes solutions that are best when it comes to what is good public policy for the citizens of the City. So I've come here today to kind of take off where the Urban Leadership Council left off. In 2002 is when the last time we approached this issue. In preparing my remarks for you today, I was struck by the fact that it was on March 8th, 2001, that I first spoke to you as Members of City Council. I came at the invitation of City Council President Verna, and I spoke to you over in your Caucus Room 17 prior to your regular meeting. The issue that I came to address then was the massive customer base rate increases, as well as the gas cost increases that had been sought by PGW and granted by the PUC. Our cause for alarm at that time centered on the fact that PGW had sought and received two increases to its customer base rate and a huge increase to its gas cost rate 104 03/30/04 - TRANSPORTATION - RES. 040149, 040216 and was poised to go back before the PUC again requesting additional increases. In fact, PGW, the Philadelphia Facilities Management Corporation, PGW's temporary management company, and even the City of Philadelphia itself -- and I would say shame on the City -- went to Commonwealth Court to appeal the PUC's decision to grant only an $11 million increase of a requested $172 million customer base rate increase. If PGW had not requested and had not received any additional base rate increases, it had already been granted a total of $76 million, which equals a base rate increase of more than 50 percent over what the customers were already paying in 1999. I digress from my notes here. I'm very disappointed in the Mayor on this one thing, if I'm not disappointed with him on several others. One of his original campaign promises for his first mayoral election was he was going to solve the PGW crisis. He has not done it in the first term and he doesn't appear to be about to do it in the second term. If we're going to be accountable and 105 03/30/04 - TRANSPORTATION - RES. 040149, 040216 responsible, we can't be afraid of the Mayor or anybody else. He has failed us on that one. Even his response to this -- what is this thing called that the gentleman that runs PGW -- this CRRC, which is the thing that represents this surcharge. That's a fancy one, isn't it? Cash Receipts Reconciliation Clause. Who came up with that? Well, he said he thought of this. This was his idea. It's a terrible idea and the Mayor has not said yet that this is a terrible idea. Well, he ought to know that the members and the organizations of the Urban Leadership Council think this is a terrible idea. Back to my notes. While we communicated with the Mayor, the PUC, state elected officials, consumer advocates and to you here in City Council, addressing the issue of PGW management and operations became the focus of the ULC's public policy advocacy agenda for all of 2000, 2001, and part of 2002. Many in the City might recall our efforts to dramatize the problems at PGW that 106 03/30/04 - TRANSPORTATION - RES. 040149, 040216 seemingly just will not go away. We marched from 12th and Chestnut Streets to PGW headquarters at 10th and Montgomery. We burned gas bills right out here in front of City Hall. We did a petition drive and declared that we would launch a class action lawsuit. We garnered 12,000 names from citizens all across this City. We went to Harrisburg and prayed in the rotunda and then sat before a joint Session of the Legislature and begged them to do something about PGW. And here we are. Here we are in 2004 with an issue so vitally important to the citizens of this City unresolved for lack of leadership. For lack of leadership.

While all of this activity was occurring, yes, the PUC obtained jurisdiction over PGW rates and tariffs. This became official on July 1st, 2000. This occurrence impacted the ULC's activities relative to our attempt to file a lawsuit because, once it was done, you can't file a lawsuit against a regulatory agency. So we learned a lot. Our efforts to continue putting 107 03/30/04 - TRANSPORTATION - RES. 040149, 040216 pressure on all of the relevant entities to do something to improve management practices and customer service at PGW, however, did not stop. Reverend Royal, who is here, one of our vice presidents, and Ms. Maria Dirksen -- this is one of the last things she did as a board member of the organization. On January 31st she attended a public hearing that was held by the House of Representatives Judiciary Committee. It was held January 31st, 2002 and it had to do with House Resolution No. 100. These public hearings provided an opportunity to review PGW's efforts to improve its management practices and the company's response to items in a mandatory audit that was required upon the PUC's assumption of regulatory authority. It was noted that at these hearings there were no local officials there. There were no officials in hearings that had been called by the State and held in the northeast part of the City. We found that rather disturbing. Since that time until the present time, many of the causes of PGW's problems 108 03/30/04 - TRANSPORTATION - RES. 040149, 040216 have not been addressed. These two items that bring us here today, Bill No. 040149 and Bill 4 No. 040216, attest to the fact that PGW and the City have not yet changed its habits of saddling customers with all of the costs of past mismanagement. These costs include increased bad debt expenses due to a failed implementation of a new billing system, which partially paralyzed PGW collections, and actual working capital as opposed to the cost of working capital due to the exhaustion of $100 million line of short term commercial credit. That's right. I didn't hear the executive from PGW talk about the $100 million line of credit that PGW runs and that the customers pay the debt service on. You ought to investigate that one. Yes, the District Attorney when we got to work on this, we went to the District Attorney and she gave us the book that contains the investigation that she sat here and talked about. I don't know if you've ever seen it or ever read it. But if you haven't, you need to get a copy of it because it's a 109 03/30/04 - TRANSPORTATION - RES. 040149, 040216 disaster, what people for 27 years have done to the City's business. This is the people's business. So I don't know what Mr. Knudsen is talking about. I know this. The only efficiencies, the only economic efficiencies that PGW seems to know is how to go to the PUC and ask for more money. Except this new thing he came up with -- and that's about as absurd as anybody's ever heard -- that's supposed to be some cost enhancement mechanism. I'm not an economist. I'm just not quite a dumb guy. We can read and we can write and we can comprehend. We can ask questions, and we do. And then when we find the answers, we're not afraid to come before you and articulate them. Yes, sometimes vigorously, sometimes even emotionally, but always because we're doing it because it is what impacts the citizens of the City that is the most important. And this company that should be benefiting the taxpayers and the citizens of the City is a billion dollars in debt, mismanaged beyond compare, and the time has simply come to fix 110 03/30/04 - TRANSPORTATION - RES. 040149, 040216 the problem. Another 27 years of this? Mr. Knudsen's people aren't even installed as the permanent managers of PGW. They're temporary people. The Mayor said that was not going to be. He was going to fix it. He hasn't done it. You need to tell him he hasn't done it and you need to fix it.

When we come to speak to you, it's not out of disrespect that we come to speak to you. It's out of respect. But it's because in the neighborhoods that we live and in the organizations that we serve these are the cries that we hear. How can you levy upon the people? Individually some bills in 2000 skyrocketed 600 percent. If you look at the books, no less than 60 percent increases hit everybody all over the City in one year and them rascals had the audacity to go back to the PUC and ask for more money. They should have been spanked then. We wouldn't be here today. I'm going to close. I know Mr. Haver has some positive suggestions. I've seen the good Councilwoman Tasco with some 111 03/30/04 - TRANSPORTATION - RES. 040149, 040216 positive suggestions. At least this time we're talking about some positive suggestions. But I have a suggestion in my conclusion. We keep talking about those who aren't paying, those deadbeats. PGW has said to us that more than half of its customer base can't afford to pay. They already know that. So why are they operating as if they have 500,000 customers when they only really have 250,000 customers? It would seem to me -- as my mother used to say, you can't get blood from a turnip. But it would seem that if we could put some kind of program in place that would say to the people who have not been paying at all for whatever reason, cable boxes or not, whatever reason they're not paying, we are going to put together a plan and you're going to pay us a percentage beginning this month until your bill is paid off. I've been with people. They know they can't keep those agreements the day they make them. You're going to pay $50 plus the current bill. Well, the current bill is $300. They can't pay. That's a dumb deal to make. 112 03/30/04 - TRANSPORTATION - RES. 040149, 040216 We need to fix that and give them something they can work with. Give them something they can afford, and I believe they will pay. They'll pay more than what they're paying now. We're getting nothing now. Maybe it's $30 a month. We can think this thing through. I will conclude with this. You go to those same people that you are not getting anything from and you tell them you've got to pay. You've got to pay your bill, but we're not going to saddle you with a burden we know you can't meet, and I guarantee PGW will be surprised at the revenue enhancement they would achieve. They would see monies come in. They would see monies come in they're not now. Thank you very much for having me again. I'm just guys thank you for listening and considering my thoughts on behalf of the Urban Leadership Council and look forward coming back here on Thursday and having my word of prayer with you. Thank you very much.

Mr. Royal.

Thank you. We first honor God and to the ancestors and to the 113 03/30/04 - TRANSPORTATION - RES. 040149, 040216 Chair of the Committees and to the Council, those who are here. I'd first like to put on the books that I always feel, even when we were at the hearings that Mr. Perzel had about a year or so ago, that they let the gas company get on and they painted this big rosy picture. But when they left and then all of us that were there, we came up with something similar to this. We were white and black, old and young, Hispanic and everything. We had a gentleman up there that computed his bill and he went to the gas company and they wouldn't accept his bill. And so I always say you should let the people talk first, and then when those technicians come behind us, then let them walk through that. But when they can paint a rosy picture or whatever kind of picture and then we follow them, they have most of the time left the room. Thank you to some of them who are still here today. We've made sure this is available to you. I want to try to give it to you in a nutshell. I represent a Community Rebirth 114 03/30/04 - TRANSPORTATION - RES. 040149, 040216 Organization Plan called CROP. It's our goal to, in essence, change the way not only just the gas company, but all of our companies in this City run. Because the biggest problem is fuel, fossil fuel. It's time to switch over to hydrogen. It's a cheaper fuel. It's a cleaner fuel. I was listening to the District Attorney. I was think about bringing up some of that, but she's done a good job. The gentleman was talking about the gas company. You got to pay us. When you start lining up all of the people that folks have to pay, everybody is going to say the exact same thing. We're not concerned about nobody else. You pay me. If it's the water company, if it's the electric company, if it's the gas company, if it's some other utility that you have, including the home box -- which I don't get a chance to look at either -- everybody wants their money and everybody has to live. I said before a hearing before the Gas Commission maybe about seven years ago, I said there was a time when me as a citizen, as 115 03/30/04 - TRANSPORTATION - RES. 040149, 040216 a taxpayer, I didn't have to use what you had. I could go out and dig my own well. I could plant my own food. I could raise my own chickens and hogs. But today I've got to go through some utility to get what I got. I've got to get the water from the Water Department. I've got to get the electric from the electric company. I've got to get gas from the gas company. So my options are limited. Even though I may not have a lot of money, I'm still limited. But then I'm caught in. I'm going to tell you something that many of you may not believe. It's been almost 10 years. I told the gas company to come and shut the gas off about years ago right 18 before my son was born because we had been 19 using gas, me and my wife, for about five 20 years. Then all of a sudden one day they sent a bill in for $200. I added up all the bills for five years. They didn't add up to $200. So I went down to the gas company. I was with Curtis Thomas at the time and we sat down and we negotiated. You know what they said? They 116 03/30/04 - TRANSPORTATION - RES. 040149, 040216 said, Mr. Royal, what we will do, we will forgive the bill and take it back to the regular bill if you don't put it in the Consumer Voice. I said, well, if we win this case, I want it in the Consumer Voice. I said, other than that, come cut the gas off. It was awful until my son was born. I had to turn it back on. So for last years I had 10 no gas in my house. I told them to come out, cut it off. And I said you can go down there and check it. I don't steal the gas. About three years ago, four years ago, the guy came around one day talking about there's a law at the state level, if gas is off in a particular house for so many years they dig up the street and cut it off outside.

That's what the DA was talking about. Well, that's a lie. Because there are four houses up my block that were empty for 20 years and they just dug up the street for them when they dug it up for me. I'm talking about changing the way we do business. We need to move in consumer stock ownership or employee stock ownership. 117 03/30/04 - TRANSPORTATION - RES. 040149, 040216 We're going to do the same thing that's been talked about here earlier. We're going to be working at the state level too. Because there's a lot of things, that years ago had 6 this problem been solved, we wouldn't be 7 talking about this here today. But we have to 8 talk about it now. We are all suffering 9 because the people that they're now saying -- 10 they want to openly say, if you're paying a 11 bill, here's an additional charge to the 12 seniors that have been around 60 or 70 or 80 13 years, who have always paid their bills, now 14 we don't want to give you any help. We're 15 against that. We're now talking about 16 transformation, changing it from what it is to 17 where we think it ought to be. 18 And we ought to be under hydrogen. 19 We've got 300 years' worth of coal in the 20 State of Pennsylvania. There's new technologies that can turn around and turn that into clean fuel, water stock hydrogen. Now, there's another problem that's getting ready to come on the horizon that will be made clear very soon. They're talking 118 03/30/04 - TRANSPORTATION - RES. 040149, 040216 about globing warming. That is here. And if we don't change what we're doing -- there's some other entities that we'll talk about at a later time -- but we're going to talk about this again. We're going have to change the way we're doing business, not just because it makes good sense, but if we want to live healthier, there's certain things we're going to have to do that we have not been doing against Mother Earth. So we're saying to you as we get ready to close, the time is going to come, either this Body, along with this Body, along with these other bodies, work together because there are many more people out there than there are in here. And when you give a very clear, convincing argument that makes all the sense in the world, all we're talking about now is changing over so that the fuel that we're now using can stop polluting the air as much. It creates many jobs. It's a cleaner burning fuel, uses water as a stock base and it creates jobs, high technical jobs, because that's where we should be going. Business as 119 03/30/04 - TRANSPORTATION - RES. 040149, 040216 we know it must change. So we will be bringing the technicians to the table that will be showing folks in abundance, here's what we should be doing and here's how soon we should be doing it. Otherwise, the tipping point is already. So I thank you again and I would ask you hopefully in the future, always let the consumer talk first, then let the other guys follow. It will be a little bit harder for them to tell us those smoke and mirrors in your face. God bless you.

Thank you very much. Any questions of either witness? (No response.)

If not, thank you very much for coming and being so patient and having us share your knowledge. Lance Haver. MR. MOY (ph): Chairman, Co-Chair and other Members of the Committee, my name is George Moy. I'm here today representing the Philadelphia Chinatown Development 120 03/30/04 - TRANSPORTATION - RES. 040149, 040216 Corporation, PCDC, in our community. We, the responsible gas customers, are vehemently proposed to the effort by the Philadelphia Gas Company to pass on to us the losses incurred by delinquent customers. Passing the losses on to the honest bill payers is ridiculous. It is tantamount to robbing Peter to pay Paul. Is PGW also trying to collect a high interest penalty in addition to the normal charges? That would be a double whammy. Such a plan would cause undue hardship, especially on top of recent rate increases in a very harsh winter. Many, particularly people who are having a hard time now paying their bills, will become delinquent themselves. If they are made to cover the losses, then what? Does PGW come back in a few years seeking another bail out? We see no end if this is how PGW seeks to solve their problem. Any private firm that allows customers to continue to use their product and not pay their bill time after time do not survive very long. Just because PGW is a monopoly and has no 25 competitor, they should not have the right to 121 03/30/04 - TRANSPORTATION - RES. 040149, 040216 pass on costs of poor management onto their customers. Management should be the first to make the sacrifices for the company to become whole. PGW must become more efficient and frugal. Get rid of the dead weight. Remove unnecessary layers of management and duplicity. That is what the private sector has to do in hard times to survive. If losses are due to mismanagement and PGW cannot solve it without charging the innocent, then it's time for the City to consider privatizing management or the entire firm. As an example of the mismanagement I referred to previously is the unnecessary thousands of dollars of extra costs that our non-profit PCDC incurred recently due to bureaucrats at PGW. It was thousands of dollars, around $30,000, that we had to come up with. Under ordinary circumstances when planning a housing development, the developer seeks to work out and resolve all the problems well before starting construction. This does 122 03/30/04 - TRANSPORTATION - RES. 040149, 040216 not appear to be the case at PGW. Developers are told that only when they are about to begin construction will the gas company review the construction plans as it pertains to their gas service. There appears to be no set of rules. What PGW approves at one time does not apply the next time. As an example, at our 55-unit housing development PCDC completed in 1998, gas meters were approved for installation in an enclosure inside the house. Four years later in our recently completed 11-unit housing development, PGW insisted that the meters be installed at the exterior of the front wall of the new houses, even though the architect had designed a special enclosure to conceal the meter in the kitchen at the rear of the house. This decision on the part of PGW not only ruined the aesthetics of a well-designed housing development, it contributed to the cost over-run. When the architectural firm was designing the project, the architect hiring an engineering firm to design the plumbing 123 03/30/04 - TRANSPORTATION - RES. 040149, 040216 system. They discovered that there was no gas line in the front of the newly designed building, therefore the engineers designed a gas system that would connect to the existing gas line that had been terminated at the rear driveway of the new houses. The new gas line designed would then be installed below the driveway along the back of the houses. This of course made a lot of sense, but not to the bureaucrats at the PGW.

They insisted that a new gas main be located and installed at the front of the houses in spite of the multitude of utility lines that were in the way. At PGW's insistence, they made our contractor dig up the middle of 9th Street for the gas main. This created an additional cost of thousands of dollars for our organization. What is ironic is that they abandoned the idea of installing the main in a newly dug trench due to the difficulty they encountered, which we had foresaw, that is, all the other utility lines. There was a steam line. There was a sewer line. There was a water line. There were electric lines buried in the street. 124 03/30/04 - TRANSPORTATION - RES. 040149, 040216 There were cable lines. Even though it's on maps that shows it's in the street, they insisted that we dig this trench and they never put the gas line in that trench anyhow. It was a total loss. What I described exemplifies how PGW is managed. It's time to drastically overhaul PGW. Otherwise, the future looks bleak. There were some comments I just added when I heard the other speakers. PGW has a fiduciary responsibility. They should not have let the management get so far ahead in the mismanagement. The Councilman came up with an excellent idea, that he would use his staff to get the elderly to sign up for the discount. You can also count on the many community organizations around the City that will volunteer to do that also. So that wouldn't present an extra burden on PGW's staff to reach out for the poor, the widow or the ones that can't get out of their homes to get the discount or to get the help. If PGW is awarded the extra cost that they're seeking, what is the incentive to 125 03/30/04 - TRANSPORTATION - RES. 040149, 040216 exercise due diligence? They got this solution. If they get the approval to get the surcharge, they'll just abandon the idea of trying to collect. Now, I'm sure that the thousands of non-payers, that they could look at their customer list and find over the years the same names coming up of people who are not paying their bill. And that should not be allowed to continue year after year. Cut the gas off, then they'll know. The mentioning of the fact that people that get gas and don't pay for it, as a housing inspector, before I retired, I've been into homes where the thermostats are up to 85, the maximum, and in some cases even the gas stove is on and then the window is open and the people in the house are running around with just light clothing. There's no 21 incentive for them to cut cost or to save. I thank you for allowing me to submit this testimony.

Your views, both of you, are very helpful. 126 03/30/04 - TRANSPORTATION - RES. 040149, 040216 Lance Haver, do you want to have a chance?

I just want to mention that copies of my testimony are with Councilman Rizzo. Thank you. MR HAVER: Good afternoon, and thank you, Councilman, for putting the consumers first before those of us who work for the City.

It doesn't matter whether you're for the City, you still come toward the end.

Well, I appreciate it and I think you're right. I'm glad to see you're still doing it. My name is Lance Haver. I'm the Director of the Mayor's Office of Consumers Affairs. If I could, I would start my testimony with a scream of pain and anguish. It should be clear that when we talk about PGW, the situation is grim, but we must start with some basic truths or the conclusions we come to will be of little value. First, the overwhelming majority of 127 03/30/04 - TRANSPORTATION - RES. 040149, 040216 the problems have been caused by mistakes made by the previous management of the gas company, the rising level of poverty in the City, and the recent spikes in the price of natural gas. The previous management of PGW was not just bad, it was criminal. The four top executives were charged with crimes of theft and fraud. Two were convicted. They bought the wrong computer system, couldn't send out accurate bills, couldn't answer the phones in a timely fashion or provide basic systems and service. And I would just like to leave my testimony and just talk a bit little bit and thank -- I'm sorry that District Attorney Abraham is not here -- and thank her for helping me tell you how far we've come. That audit she gave was the old management four ) people that were indicted, two were convicted. I didn't have time to go list by list over all improvements, but just because I'm so familiar with the Gas Works, I was able to take a little bit of notes. For instance, already gone, from my 128 03/30/04 - TRANSPORTATION - RES. 040149, 040216 knowledge, is the legal services and consulting for executives. That program has been removed. The parties; gone. Club memberships; gone. Donations to alma maters -- I don't know how many of you remember this, but the past president of the Gas Works decided to use our money to send to the school he graduated from; that practice is gone. Credit cards are gone. They cut the public relations staff that District Attorney Abraham pointed out was at 17; that staff has been cut to 3. The outside legal contracting has been cut by $3 million. The cause for executives have been cut to a much smaller number. And I know the District Attorney Abraham may not follow gas utility issues as closely as I do, so she may not be aware, but once it was moved to the Public Utility Commission, the Gas Works fell under the State Ethics Act. A lot of the practices that the District Attorney Abraham pointed out how bad they were have been completely removed. And we know that because the Gas Works passed the audit at the Public Utility Commission. I 129 03/30/04 - TRANSPORTATION - RES. 040149, 040216 just bring that about to just point out and try to be as honest as I possibly can, that those changes would not have happened without Mayor Street and this City Council taking a lot of positive steps. I'm not suggesting for a second that we don't have a long way to go. The situation is really bad. It is truly bad, but to not be realistic and not point out how far we've come, I believe is a mistake. For instance, PGW, under the new management, has increased the number of people receiving LIHEAP and they've started to work with the Working Families Campaign to help our citizens qualify for the Earned Income Tax Credit so people will have the money to pay their bills. The office in South Philadelphia is now a Vita (ph) site. Yes, there are some problems. It's the first year. It's a pilot program.

Now that you're mentioning these, I think you ought to send a copy to the District Attorney so she can have knowledge of it and she can incorporate it in her reply. 130 03/30/04 - TRANSPORTATION - RES. 040149, 040216 But why, if there is record of accomplishment, does Mr. Knudsen continue to flaunt his will at Council and say, "Butt out. You have nothing to do with it. I, Mr. Knudsen, have the responsibility." Because he's surely following the policy that's going to eliminate any credit given to the City.

Councilman, I've known you too long to argue with you. I can't speak for Mr. Knudsen. There are some things I wish he would do differently, and I'm going to go through that list. I share some of your complaints. I wish that Mr. Knudsen would start out point by point explaining what changes he's made and take credit for the good work and talk about the problems. A lot of times when you have people who are technical experts, they talk in technical-ese. I understand. But all I can do is tell you from my point of view. I can't speak for Mr. Knudsen. I can only tell you that I remember when Mr. Haus and Mr. Martin were breaking the law. I remember when they were stealing the 131 03/30/04 - TRANSPORTATION - RES. 040149, 040216 money. I remember when they couldn't answer the phone and they couldn't send out bills. I remember when they were taking my money and going to golfing outings and they were taking my money and sending it to his colleges. And I know that Mr. Knudsen has stopped all those things. I went to Mr. Knudsen and said, "There's a problem. People are so poor we can't pay our bills. We must use the gas offices to help people qualify for their Earned Income Tax Credit." He did that. He made that happen. Now, why he doesn't come here and tell you that and brag about it, I can't answer.

He tells us to butt out. He's not interested in our opinion. He doesn't want us to have anything to do with the Gas Works.

Councilman, you'll have to take that up with him, unfortunately. Last I checked, I worked for the City.

I have no 24 confidence at all in him because I have to be convinced that he acts like a man trying to 132 03/30/04 - TRANSPORTATION - RES. 040149, 040216 hide a lot the things.

In my honest opinion and as long as I've known you, I will tell you that I believe PGW is headed in the right direction. It needs a lot of work. And I would also ask everyone to notice that Mayor Street and this City Council has done more to correct the problems than the past Administration. The last time the natural gas crisis spiked, the City lent PGW money to help relieve the burden on consumers. Now the Mayor has recommended that the City forego the $18 million annual payment that PGW makes to the City in an effort to keep bills within the reach of our residents. If Council approves that, that's one more way that this Council and this Mayor are helping gas consumers that no previous Mayor has done, and I think that's noteworthy. Over the years I've always said that $18 million payment should not be made. It's a tax on the poor and on the working people, and the City has no right to collect it. The Mayor and City Council are now saying, yes, 133 03/30/04 - TRANSPORTATION - RES. 040149, 040216 the gas bills are so high we have to do something about it. I think you deserve credit for that.

Well, I don't know. I know I, and I know a number of Councilmembers have been over the years raising the issue of why is this $18 million payment being made to the City. And the Mayor -- and the Mayor was Governor Rendell -- insisted on the payment. And all mayors before Governor Rendell insisted on it.

And we're now addressing that point.

And so did Mayor Street until this year.

Absolutely. But if someone comes lately to correct the problems, I'm still going to thank them for correcting the problem. Past differences and past mistakes and past bad policies --

I agree with you, except that Mr. Knudsen at this late stage is still adopting the same policy of, I'd rather see PGW go down than to have to let in a 134 03/30/04 - TRANSPORTATION - RES. 040149, 040216 little daylight or a little activity from City Council. Mr. Knudsen does not own PGW, but he thinks he does. And as long as he feels that way about it, there's no help you can give to PGW, because even the good stuff is eaten up.

If I may, Councilman, let me raise a few other ideas. I apologize to you, sir. As many years and as great as a fighter you've been for the public and for the average person, I can't speak for Mr. Knudsen. I just can't answer for him. But I can tell you that --

Well, I'm suggesting that there ought to be somebody else in his work. He obviously is not willing to see any role for City Council. He's not read the Home Rule Charter, doesn't understand our responsibility and our insistence on carrying out our duties. We made pledges to the voters because it was our duty to do so. Under the Home Rule Charter we had to agree to accept responsibility. He wants to eliminate our share. I don't know 135 03/30/04 - TRANSPORTATION - RES. 040149, 040216 why, so I think of the worst possible thing. In view of the history of PGW, the answer seems to me if somebody's pushing Council out, that there's things he doesn't want Council to know about.

Let me just finish and then I'll try to address that last point with your permission.

You try nobly, but it's not going to help with him.

I've gotten that point. The problems that have not turned around are the skyrocketing price of natural gas and the ever greater number of people living in poverty in Philadelphia. Here are the facts. Gas bills have gone up by almost 50 percent in the last two years. The income of the poor, working poor and even middle class has in real dollars been declining since 2000. On average, Philadelphia families have seen their income decline by 7 percent. Over 22 percent of the City is living below the federal poverty level. The problem should be 136 03/30/04 - TRANSPORTATION - RES. 040149, 040216 clear, how can people who are barely making enough to get by before, pay bills of almost 50 percent more when their incomes are dropping? They simply cannot keep up. What then should we do. Let's start with creating incentives for management and workers at PGW to perform. Compensation for PGW's management and unionized work force should be tied to efficiency bench marks. Unless we do that, there is little, if any, incentive for PGW to improve its practices. Private utilities use the profit motive to drive efficiencies. PGW can use the same motive to drive its work force. Council should look to help PGW increase its efficiency by doing a cost benefit analysis of combining PGW's meter reading, billing and collection with the Water Department. Both are City-owned, and combining them should save everyone money over the long run. PGW should be asked to amend its PUC filing to ask for the tools it needs to increase collections while at the same time keeping the winter moratorium in place. The 137 03/30/04 - TRANSPORTATION - RES. 040149, 040216 winter moratorium must be kept in place not only because it's the moral thing to do, but also because shutting people off in the winter will actually cost the City more than allowing people to pay what they can. Winter shut-offs mean water pipes will break, homes will be abandoned, real estate taxes will not be paid, the number of people using the shelter system will increase and eventually the City will have to pay to either board up the homes or knock it down or both. While saying that, I do not mean to imply that PGW should not go after those who can pay but are refusing to do so. They should ask the PUC for the tools to do it. PGW must be allowed to use its neighborhood offices for one-stop shopping for benefits as it stands now. As it stands now, there's no central location in the City to apply for all the federal, state and City programs to help low income consumers receive benefits like Earned Income Tax Credit, food stamps, LIHEAP, weatherization, and access to help escaping predatory loans. I believe this 138 03/30/04 - TRANSPORTATION - RES. 040149, 040216 Council should not only give PGW the right to begin to develop a one-stop shop to help our most vulnerable, but should help PGW do so. Every penny that we can bring in, every BTU we can serve, every burden we can make lighter for our citizens helps our citizens be able to pay their bills and make it possible for PGW to pay theirs. Council must also do whatever it can to convince our state and federal delegation that current energy programs are hurting, not helping, Philadelphia consumers and PGW. Pennsylvania is one of only two cold weather states that does not add anything from the state budget to the LIHEAP and crisis budget. We should. On a federal basis, we must ask our delegation to introduce legislation that will tie the annual LIHEAP authorization to the price of natural gas and heating oil. As it stands now, the federal government purposely allows gas and oil prices to rise to encourage more drilling, but it does nothing to protect those who, through no fault of their own, cannot keep up. No one should be 139 03/30/04 - TRANSPORTATION - RES. 040149, 040216 forced to freeze so that a handful of multi-national corporations can increase their profits. Instead, the LIHEAP authorization should be tied to the price of natural gas and oil.

When they go up, the amount of LIHEAP grant would increase in the same proportion. Funding for conservation programs should be dramatically increased and targeted to payment troubled customers. We should ask the Department of Energy to float weatherization bonds that can be paid for with the energy savings so that we can help everyone conserve and keep their gas bills down. And PGW should join with other utilities that are suing companies like Enron for price fixing and overcharging. Council can also help grow PGW's business clients. Whenever you grant a TIF or tax break or low cost loan, you should require the business enjoying those benefits to use PGW as their primary fuel for both heating and cooling. The more business customers PGW has, the less burden on its ratepayers. Let me just close with another idea, 140 03/30/04 - TRANSPORTATION - RES. 040149, 040216 and then if you have any questions I'll be happy to answer. Council should insist that PGW start to reward ratepayers who pay on time every month for months. A cost effective 7 incentive program would help create an 8 incentive for people to make PGW bills a 9 priority. 10 I thank you for your time and will 11 be happy to answer any questions. 12

It's a very fine report. Councilwoman Tasco.

Thank you so much, Lance, for all those wonderful ideas. And PGW doesn't need Council's permission to do any of that stuff. They just need to develop the programs and propose them to their board. We have budget oversight. That's about all we have. Bring the program to the Council. I think Council is saying they want to do whatever we have to do to make sure that the company is running efficiently, and any 141 03/30/04 - TRANSPORTATION - RES. 040149, 040216 creative idea that helps not only them, but helps the consumer, we don't have to give our permission to do that. It's inherent in the fact that we tell them to run the company in a way that's going to be beneficial to the ratepayer and also cause them to collect the money that's due them.

Perhaps I'm deferring a little bit too much to Councilman Cohen's request.

I think what you need to do is talk to the Administration and to the board to give them the leeway to do the things that they need to do. That's where the real power comes from. I mean, Council is probably secondary in this business here, from my observation.

Thank you.

Any other questions or comments? (No response.)

I thought it was an excellent suggestion -- all suggestions by Lance Haver. But with me, I have to tell you 142 03/30/04 - TRANSPORTATION - RES. 040149, 040216 the first one is leadership. Whatever good you spoke of, I think it had nothing to do Mr. Knudsen. Anything wrong, I agree everything had to do with Mr. Knudsen. That's how I feel about anybody who asks City Council to butt out on our most important assignment. A City facility is in trouble and he tells us he's the one that's responsible. Let him go solve it. If the Mayor feels that he wants him to solve it and not Council, let the Mayor and Mr. Knudsen solve it. I'm not for helping them because I think they're going to get us deeper in trouble and not going to help solve it. But what will help it is if Mr. Knudsen resigns or gets removed from office and we get somebody in there really interested in helping PGW survive, either as an entity or some other form with the City government.

Councilman, I want to as respectfully as I can disagree with you. Mr. Knudsen has made tremendous strides in improving the company. It has a long way to go. And I would encourage you to sit down with him in private and talk with him. He has 143 03/30/04 - TRANSPORTATION - RES. 040149, 040216 been an advocate for the poor for many years. He has done good things --

That's all ancient history.

Well, Councilman, as much as I respect you and as much as I think you're wonderful and you've been a great voice, on this one point I have to disagree and say I think you're wrong. But I do thank you very much for your gracious time.

I've called him on various times. He never replies to his phone because he doesn't think he owes any duty to speak to anybody in City Council apparently. So I've given up trying to communicate with him. There's no point. He just feels he doesn't have to respond to you. He can ignore you. Maybe the Mayor can do it and get by with it. But I don't think Mr. Knudsen can do that and effectively operate PGW. Thank you. I'm sorry we disagree.

Thank you.

I have one question. Thank you, Mr. Chairman. 144 03/30/04 - TRANSPORTATION - RES. 040149, 040216 I read with interest a series of recommendations you spoke to on the kinds of things PGW can look at to reckon with this deficit we're facing. I was struck by the recommendation suggesting that, as we the City move to approve new tax incentive packaging, that we might want to strongly encourage those corporations to use PGW as a source of energy. Do you know if there are any other cities doing that type of thing? Do you have any experience you can look to which suggests this might be a good idea? Give us your insight on that.

PGW is the largest municipally-owned gas works in the nation. So it is unique in it being part of the fabric of economic development for the City. I'd be happy to look at the much smaller municipally-owned utilities like Memphis and Indianapolis and get that information to you. But in many ways, from my opinion, because we're in a crisis it gives us an opportunity to come up with some innovative solutions. We know that what we're doing now 145 03/30/04 - TRANSPORTATION - RES. 040149, 040216 doesn't work. Any person that you say we're going to raise the bills because other people aren't paying wants to scream. And the only way that becomes acceptable is if all the other options are worse. So what we have to do is come up with some innovative solutions, try them in small pilots, and those that succeed, implement, and those that fail, not be ashamed to say we tried something that doesn't work. I will do the research that you ask because of course I would like to see us try this. But I just want to make sure that we understand that PGW is really unique in its dire situation and unique in how large a municipally-owned utility it is.

Well, I agree with you completely that we have to think out of the box because following what's worked in the past isn't working any longer. I will look forward to that back-up information just to get a sense on what other cities are doing. I thank you for your insight on that. Thank you very much. 146 03/30/04 - TRANSPORTATION - RES. 040149, 040216

Thank you, Councilwoman.

Any other comments or questions? (No response.)

If not, the two resolutions before the Transportation and Public Utilities Committee, that is Resolution 9 040149 and 040216, will be held in recess until the call of the Chair. Councilman Nutter wanted us to express his regret at not being able to be here. That's because he was a recipient of the Fine Fellowship in Africa for a 10-day period. We all wish him well and are looking forward to his return in a couple of days. Thank you. Councilwoman Blackwell.

Thank you, Councilman. The Committee on Finance will reconvene in order to say that we will recess until April 7th, 2004 at 2:00 p.m. Let me note that we request that PGW works on the senior citizen info, so hopefully 147 03/30/04 - TRANSPORTATION - RES. 040149, 040216 during that day we can begin and end. It's a budget day in the morning, but we want to try to get this matter expedited. Thank you all and thank you for your patience. (Council adjourned at 5:05 p.m.) - - - - 148 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 Tuesday, March 30, 2004, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON FINANCE and COMMITTEE ON TRANSPORTATION AND PUBLIC UTILITIES _________________________ Lisa C. Bradley, RPR