To invest or to innovate: Philadelphia Gas Works’ $8 billion question
[Press Release | March 2023]
An independent analysis by the nonprofit HEET finds that Philadelphia Gas Works (PGW), the city’s municipal gas utility, is projected to spend up to $8 billion over the next 35 years on new gas mains and service lines—even as the city aims to achieve carbon neutrality in nearly the same time frame.
While replacing aging gas pipes with new ones addresses safety concerns and reduces gas leaks, it also ties the city and ratepayers to paying for gas infrastructure for decades to come.
The report, written by economist Dorie Seavey, made spending projections based on analysis of PGW’s reporting of current spending as well as regulatory filings and documents. It finds that the per-mile cost of PGW’s pipeline replacement has been increasing 8.5% per year and that by 2058, PGW will still have over 700 miles of aging pipes to replace.
At the utility’s current pace of replacement, these aging pipes would not be replaced until 2078, nearly 30 years after the city’s 2050 carbon neutrality goal.
As Philadelphia works to reduce emissions by transitioning to electricity, fewer gas customers will remain to pay for the gas infrastructure, setting up a recipe for rising energy bills.
According to the report, the full opportunity cost of the city’s massive gas infrastructure investments is not receiving adequate consideration. “PGW’s infrastructure decisions are made in five-year planning increments that fail to create accountability for the multi-decade scope of pipeline spending,” said Dorie Seavey, PhD, the research economist who authored the study. “The big picture isn’t on the table.”
Audrey Schulman, Co-Executive Director at HEET, asked, “Instead of investing billions in the gas system, what would happen if Philadelphia chose to redirect those funds to building a cleaner, safer and more affordable energy system for its residents?”
Following its 2021 Business Diversification Study, PGW in its FY2023 budget committed $500,000 to exploring a non-emitting, renewable alternative to gas: networked geothermal, a technology that can provide both heating and cooling through networked ground source heat pumps at the same or lower cost than gas.
Philadelphia follows in the footsteps of states such as Massachusetts, where five utility networked geothermal installations are already approved by regulators, and New York, where legislation recently passed mandating that the seven largest utilities install geothermal demonstration systems.
Innovations like this are needed in a city where residents already experience one of the highest energy burdens in the country and 30 percent of PGW’s gas customers qualify for federal energy-bill assistance payments.
Reverend Angela Brown-Vann of St. Mark A.M.E Zion Church said, “Across Philadelphia, many low-income residents and communities of color suffer from unaffordable energy bills and toxic air pollution. We need an informed, city-wide conversation about alternatives in order to find the best path to protect our residents.”
But the city is uniquely positioned to move forward a utility-led energy transition. With the largest municipally-owned gas utility in the country, Philadelphia has the ability to more easily and quickly make changes to the way the city sources and delivers energy.
“Philadelphia was one of the first cities to install natural gas infrastructure in the country,” Schulman said. "It’s the perfect place to innovate again.”
HEET is a nonprofit climate solutions incubator based in Massachusetts working to cut carbon emissions by driving systems change. HEET does not accept funds from the gas or geothermal industry.
Contact: carrie.klein@heet.org
