UIL Explains Why It Wants to Purchase Philadelphia Gas Works — and What it Intends to Do With It

Michael West, UIL Holdings Corp.

The hot topic before the City Council this spring and summer is whether it will accept an offer from Connecticut-based UIL Holdings — which already owns three small gas companies and one electric utility in Connecticut and Massachusetts — to purchase and privatize Philadelphia Gas Works. The city would get a $1.86 billion payout to shore up underfunded municipal pensions, but PGW’s unionized workforce has raised concerns and City Council is taking its time with the project.

Michael West, UIL’s director of corporate communications, has been one of the company’s point men on the project, making public appearances in the Philadelphia media to answer questions and soothe concerns. He met last week with Philly Mag to discuss the sale, whether UIL is big enough to swallow a Philly-sized market, whether union employees should be concerned, and other topics.

Why don’t we start by setting the table a little bit and talk about how we even got here in the first place. When you saw that City Hall was putting Philadelphia Gas Works up on the auction block, why did UIL decide to bid?

There isn’t [often] an opportunity [where] a utility company can grow organically …  it’s rare that a utility comes up for sale [like this]. Geographically, this made sense for our company. We thought there was room to make investments and actually be able to manage the system.

PGW’s different from the other gas utilities that you own in ways that seem like they could alter the DNA of your company. PGW serves more than 500,000 customers in Philadelphia, while the three gas utility companies that you currently own — The Southern Connecticut Gas Company, Connecticut Natural Gas, and Berkshire Gas Company — total about 385,000 customers, as I understand.

More like 400,000. So it’s not that much bigger.

That’s still going to more than double your gas customers. Getting bigger fast is a challenge for many companies.

We’ve actually already proven our ability to do that. Before we bought the gas companies that we currently have, in 2010, we doubled our market cap to buy those companies, and since then have integrated them into [our] delivery systems. We had electric customers. We now have natural gas customers. The services are essentially the same, the delivery system is the thing that’s different. So instead of poles and wires, you’ve got pipes. And so we have experience in doing this, which is why we feel like this is a good move for us. We’ve done it before and we’ve proven to Wall Street we can do it. They’ve responded by the fact that our stock has performed how it has, and when we started to present this idea, I think the fact that we have a proven track record helped.

Were any of those public-to-private conversions like this one?

No. There aren’t many publicly owned gas companies, period. Most of those cities felt that this was not a core service for them and they got out of that business probably [in] the 1940s. So that’s the whole point of the original question. This is very unusual to have a company like this for sale, because there’s not many left.

Are you looking at anybody to guide you through the process of going from public to private?

No, we understand it. In terms of managing the business, it’s what we do. It’s nothing different. Certainly there is a City Council process that’s new; that wouldn’t be in place in any other deal. The Public Utilities Commission [process] is not new. So that would exist just like it exists in Connecticut. There’s an Attorney General in Pennsylvania, just like in Connecticut. There’s a consumer advocate in the state of Pennsylvania, just like in Connecticut. The only difference here is the City Council process. Once those things happen and after City Council process, it would go to the PUC for approval, which is the same again as in Connecticut and other states. The business is the business. There’s no difference.