Transforming PGW into a Municipal Utility for the Next Century

Last month, nearly 100 people showed up for a hearing about The Sustainability of PGW. Who were they? People concerned about the climate crisis, renewable energy advocates, environmental justice advocates, economic justice advocates. They included experts from academic institutions, renowned research centers, and representatives from the City and PGW. They had all waited months for this hearing, ever since Council members Derek Green, Blondell Reynolds-Brown, and Allan Domb proposed holding it last December through resolution 181081.

What’s so intriguing about discussing the Sustainability of PGW?

Well, Philadelphia Gas Works, or PGW, is our municipal gas utility. The largest publicly owned gas utility in the US. PGW’s primary business model for over 100 years has been to sell “natural gas”. And now, in light of the 2015 Paris Climate Agreement, the 2018 report by the IPCC (Intergovernmental Panel on Climate Change), and per estimates by our Office of Sustainability that PGW’s principal product accounts for 22% of our City’s greenhouse gas emissions, it is time for a new business model for the utility, one that can keep all Philadelphians warm, and retain the current workforce without selling and/or burning gas.

Prior to the April 26th hearing, there was a radio show discussing the topic by Philly’s Ready for 100 leader Meenal Raval. You can still listen to a recording or read the show script here: The Future of PGW – A Just Transition Beyond Selling More Fracked Gas. This was offered as written testimony prior to the hearing. Also, prior to the hearing, the Alliance for a Just Philadelphia, on their People’s Platform, called for Council to commission & fund community-labor led studies on transitioning Philadelphia Gas Works to 100% renewable energy. This is an alliance of about 30 groups within the city, making progressive demands.

Council member Kenyatta Johnson chaired the hearing, and Council member Derek Green led the discussion. Others present were Council members Al Taubenberger, Curtis Jones, and David Oh. If curious, you could watch the entire hearing, almost 3 hours long, or read the 162-page transcript.

What could the transformation of PGW look like?

Several people spoke of the need for PGW to transition away from all fossil fuels, particularly gas. Reverend Greg Holston, Director of POWER, suggested that the City issue a moratorium on all new fossil fuel projects, including for new gas service lines to residential and commercial customers. He reminded us that the City’s 80% reduction by 2050 goal does not address the urgency of our time, as did Kelly Flanigan from Penn Environment. Reverend Holston’s ask? Conduct a participatory study to examine how PGW can transition off of fossil fuels, while ensuring energy affordability and protecting and expanding public sector jobs. Related, Nicole Karsch from the Sunrise Movement asked for a study to get to net-zero heating for all Philadelphians by 2030.

There was also a call to reduce our energy demands with energy efficiency first, meeting our remaining demands with zero-carbon energy sources. As Mike Ewall from Energy Justice Network said, our energy priorities must be conservation first, then an investment in energy efficiency, and lastly, a focus on clean renewables like wind and solar and storage. We also need to hone in on large commercial buildings. Proactive planning to reduce the energy needs of large buildings must begin today, as Los Angeles and New York City have demonstrated.

Mark Allan Hughes offered an academic framework for analysis, using a spectrum with alternative pathways to reach either end: To electrify everything that PGW currently powers; or to put carbon-neutral gas in PGW’s pipes. He reported to us that the “electrify everything” idea is currently the most important policy conversation taking place in the world. Others reminded us that we must pursue electrification in lockstep with decarbonizing our electric supply.

From Professor Nathan Phillips’ experience in Boston, there was a good discussion about the need to triage distribution line repair based on the largest leaks; a Penn Professor is willing to lead the study for Philadelphia.

Having researched natural gas systems in urban areas for 10 years, Professor Phillips found that many cities with old infrastructure had largely cast iron pipes, many of them leaking. His team found that 30% of pipes in Boston are leak-prone. He anticipates a higher percent in Philadelphia. [In Boston], they considered replacing the leaking pipes. But which pipes? A study showed that 7% of leaks account for 50% of the lost gas. So they focused on triaging the pipe replacement while considering options to heat without gas.

Professor Phillips reminded us that we’re at a fork in the road today, and we need to decide whether we’re going to commit to rebuild our infrastructure using a 20th century model, or pivot into the future with options that are cost effective and proven to be cleaner and safer than gas.

This led to a discussion about shifting funds from distribution line repair to subsidizing the transition to electrify the heating sector.

Others also chimed in calling for a phased approach to reduce and discontinue gas service — neighborhood by neighborhood or branch by branch — and to ensure that gas customers still on the system do not bear the cost. As we disconnect gas service, we can simultaneously electrify communities by block and neighborhood to shut down entire segments of pipes. There are several benefits of doing this, including less tearing-up of streets, less traffic diversion, reduced need for asphalt, cleaner energy use, and of course, reduced methane leaks.

Mark Kresowik asked Council to ensure that new residential and commercial buildings do not use gas or any other fossil fuels, giving the example of Washington DC. He cautioned us to not make the problem worse, because retrofitting is more expensive than building electric-only in the first place. Mark Silburg said much the same — that we stop expanding gas services to new customers, and that we look at the proactive planning being done in Los Angeles and New York City.

One new idea was to reconsider district heat. District heat is a system shared by several buildings, whether as residential neighbors or on a campus. Zero-carbon geothermal installations would be ideal for district heat.

As we focus on electrifying everything, we should also plan for seasonal energy storage. A technology called pumped hydro storage, installed in nearby quarries and mines, comes to mind for this.

Some new business models for PGW could be 1) to become a heating service provider instead of selling gas as a commodity; 2) to offer energy audits and recommend and/or install efficient appliances; 3) to develop local heating and cooling infrastructure for districts, especially since their workforce is well suited to geothermal installations; 4) to be a distributed resource financing utility, offering on-bill financing, incentives, and time-of-use discounts to minimize peaking concerns; 5) to assign qualified contractors for the electrification; 6) to retool the current workforce on the emerging business of heat-pump installation and maintenance; 7) to become an ESCO (an Energy Saving COmpany) where the savings can help finance the transition; 8) to aggregate the electricity buying power of all Philadelphia residents in order to lower costs for consumers and also offer greater control of our energy mix including more renewable energy.

One suggestion was to develop a pilot to electrify 100 homes, to decide how to approach a managed transition. There was also a reminder that “people want hot showers and cold beers”, so we should begin thinking of energy as a service, not a commodity. We will likely need to change the structure of PGW to accomodate what we want it to do.

Council member Green acknowledged that we don’t have time, and that PGW has limited resources, and asked if we should dip into the general funds. He also raised the question of how resources could be diverted, if not into maintaining gas infrastructure.

He also wondered aloud about increasing the real estate transfer fee as a way to have more sustainable homes. On Powering Our Future – A Clean Energy Vision for Philadelphia, the Office of Sustainability has hinted at a better idea. They suggest offering a residential energy disclosure at the time of sale. We suggest that in addition to simply disclosing annual energy use, each building could have an energy rating. Based on the HERS rating system, the more efficient a building, the lower the rating and the lower the energy costs.

Christine Knapp reported on how the Philadelphia Office of Sustainability is using a Bloomberg grant to conduct a business diversification study for PGW, to review opportunities for new energy sources, to consider new business models, and to highlight regulatory hurdles. One new energy source mentioned was renewable natural gas, or RNG, which is also known as biogas. Mike Ewall cautioned that RNG is still methane, and is still bad for the climate. He opined that the only place to consider RNG is for anaerobic digestion of sewage sludge, for use on planes and boats. He suggested that all other gas applications need to be electrified.

Mitch Chanin pointed out the that study being planned by the Office of Sustainability doesn’t match the scope recommended by earlier witnesses; we’re not just interested in a diversification study, but a complete transformation of PGW.

He also pointed out that the testimony offered by PGW assumed that gas would remain a core function of the utility. Mr Chanin asked Council to commit to a comprehensive, participatory study about rapid transition to zero-carbon heat across the city, in a way that ensures affordability and protects and creates good job.l. If the Office of Sustainability doesn’t have the resources, City Council should allocate funds for the needed transformation.

The discussion was led by Council member Derek Green, who seemed to be interested in a pilot project, and wondered what other entity could do the study faster. He also asked aloud about the community engagement component; whether this would be coordinated by a consultant that Council hires, a PGW team, or a City resource. It seems Council member Green heard our call for a more comprehensive study, a pilot project, and a faster timeline, all with more robust community engagement than is currently being planned by the Office of Sustainability.

How to pay for some of these ideas?

Suggestions were made to reallocate funds from distribution line repair to electrification: bringing houses up to code in electricity, followed by appliance-swapping. We need to help customers transition to electric heat pumps, electric boilers, electric cookstoves, and tankless electric water heaters. Another idea would be to offer rebates for electrification, like Sacramento CA and Massachusetts have done.

How to keep energy affordable?

There were concerns about energy affordability — that utility bills for heating, cooling, hot water, and electricity be no more than 6% of a household’s income. From Rob Ballenger, Public Advocate to the Gas Commission,  we learned that Philadelphia has the highest gas rates in the state, in a city where 35% of residents are low income. The City could require PGW to propose lower energy burdens in their next base rate case. We also learned that people are losing homes because of unpaid gas bills. So one suggestion was that instead, the City could subordinate PGW liens for homeowners facing foreclosure, meaning people wouldn’t lose their home because of an unpaid gas bill. Mr Ballenger offered to be the designated voice of residential customers in future structured conversations about the transformation of PGW.

When building or maintaining affordable housing, plans must include removing lead and mold hazards, and also include rewiring electrical systems to support future solar and electric-vehicle charging.

It was also suggested that labor should participate in shaping the transition, and that retiree pensions be guaranteed.

The closing statements by Council member Derek Green raised the question of what entity would best allow for public engagement, and the need for additional resources to help continue this conversation, to develop a participatory process. This last statement gives us hope for a lasting conversation.

Written testimonies below. Entire hearing on video testimony here. 



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