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Posted on Mon, Sep. 19, 2005

PGW plans to spend $5M of ratepayers' money on LNG plan


Philadelphia's hard-pressed gas-heat customers could be stuck with millions in expenses if PGW's plan to import liquefied natural gas fails to get off the ground, utility watchdogs warn.

The city-owned Philadelphia Gas Works has budgeted nearly $5 million over three years for consulting, lobbying and legal work aimed at gaining approval for its plan to bring LNG tankers up the Delaware River to Port Richmond, according to a hearing examiner for the Philadelphia Gas Commission. More than $2 million of that has been spent - before PGW even names a developer to build and run the import terminal.

Now, Commission Executive Director Janet Parrish has urged the panel to set a deadline for picking a developer, and to bar further spending on the LNG project by Oct. 31 if PGW fails to make that selection.

Such a deadline would give PGW room to proceed while protecting "the ratepayers' interest in not having millions of dollars wasted on a well-intended but quixotic quest," said Parrish in recent recommendations to the commission, which is scheduled to begin discussion of her report on Sept. 27.

PGW spokesman Doug Oliver predicted that "the Gas Commission would only ask us to end the pursuit of the project if they felt it was not a wise investment of funds." PGW maintains the LNG project ultimately will bring more revenue.

The problem right now, according to Parrish's report to the commission, "is that, for a myriad of reasons, the deal may not go forward at all, particularly at a stage at which responsibility for pro-ject costs has not yet been assumed by the developer."

This would leave gas customers holding the bag for the money spent so far, said Parrish and Philip A. Bertocci of Community Legal Services, who serves as a public advocate for residential PGW customers.

"The costs of this are definitely on the ratepayers," Bertocci said. He said commissioners should be "looking at this from a point of view of, does PGW have any chance of success in this, and if it doesn't have a chance of success, why are they spending the money it takes to pursue this?"

Once a developer is named - and Hess LNG is believed to be in continuing negotiations with PGW - that company is expected to pay back much of the $2 million-plus shelled out by PGW and to begin picking up further costs for consultants and others.

Both Parrish and Bertocci cited recent federal actions as challenges for approval of a PGW terminal:

• This summer the Coast Guard issued detailed security guidelines to protect against terrorist attacks on LNG tankers. In a major spill, intense fire from a pool of vaporizing LNG might blister the skin of people outdoors as much as a mile away.

• The Federal Energy Regulatory Commission ruled that older LNG storage sites, including PGW's, must meet up-to-date safety standards to become part of an import terminal. PGW originally thought its 30-year-old Port Richmond tanks could automatically be used.

PGW's spending on the LNG project includes $876,000 for consultants, lobbying and legal services in the year ending Aug. 31, 2004, and an estimated $2.23 million in the year ending this Aug. 31, although some of that spending has been delayed and some expenses were shifted to a more general legal account.

In the pending budget for 2005-06, PGW sought $1.75 million in additional LNG spending, bringing the potential three-year total to about $4.86 million.

Both PGW and Mayor Street's consumer-affairs director, Lance Haver, insist that the investment is worthwhile. Street strongly supports the LNG project.

"The crux of the matter is, is it worth investing a small amount money now to reap greater benefit later?" asked Haver, pointing to Philly consumers' escalating bills for natural gas.

PGW says the imports should help hold down rising costs for city gas customers, who face a 27 percent increase in bills this winter, for an average residential heating bill of about $2,000.

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Last modified: 22 October 2005

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