Gas bills for Philadelphia residents could rise as a result of the latest bond rating that the New York-based ratings agency Standard and Poor's issued for Philadelphia Gas Works.
On Friday, the bond rating was lowered from BBB to BBB-. It was "the lowest investment grade rating, one notch above speculative grade," Standard and Poor's spokesman Gregg Stein said.
PGW has been experiencing a financial crisis since before Mayor John Street took over the city's administration, Street spokeswoman Luz Cardenas said.
A low bond rating contributes to a high cost of borrowing money and indicates bad credit, PGW spokesman Peter Hussie said.
This change could result in higher gas bills for students and local residents.
"We've had difficulty with recovering revenues from customers," Hussie said.
Normally, the company's recovery rate is 92 percent. Last year it was 87 percent, and this year it fell to 82 percent, Hussie said.
PGW filed a request with the Pennsylvania Public Utility Commission on March 1, requesting approval "to collect an additional charge from customers to make up the difference," Hussie said.
"In addition, we'll have a very thorough collection campaign this year," he added. "It really involves shutting off [gas to] customers who refuse to pay."
The city has agreed to forgive the $18 million that PGW pays it each year for four years while the company attempts to regain financial stability, City Budget Director Robert Dubow said.
Additionally, the city has proposed to extend the deadline on a $45 million loan from 2007 to 2009, Dubow said. "It means we have to look at ways to keep ... our budget balanced without that money."
Dubow said the city hopes these steps will prevent Standard and Poor's from lowering PGW's bond rating any further.
The company hopes to raise its rating because "the higher our credit rating would be, the less difficult ... [and] less expensive [it is] to borrow," Hussie said.
A bond rating is determined through an analysis of a company's financial risk and business risk. Standard and Poor's looks at the "competitive landscape, what the future holds" and the company's ability to generate cash, which indicates how successful the company will be at paying off its bond holders, Stein said.
The ratings agency operates under a system of constant surveillance, Stein said. Therefore, another bond rating is likely to be issued as soon as there is a notable change in PGW's financial situation.Comments powered by Disqus
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