Natural Gas in Philadelphia

Pursuant to a congressional request to provide information on the natural gas situation in Philadelphia from 1975 to 1983, GAO focused on the operations of a municipally owned and regulated distribution company, the Philadelphia Gas Works (PGW) and its two major suppliers.

GAO found that PGW total sales and number of customers fluctuated between 1975 and 1983 because of economic conditions, population trends, and the company's policies on accepting new customers. The company's sales rise and fall considerably during the course of a year due to a high proportion of residential customers who depend on natural gas for heating. During the 8-year period reviewed, the average gas price increased by more than 300 percent. Prices to residential customers whose supply is ensured rose by a higher percentage than prices to businesses. Customer prices rose to offset operating expenses such as increased cost of gas from suppliers, processing, distribution, marketing, administrative expenses, taxes, and depreciation. In September 1983, PGW reduced its rates by 9 percent. This reduction was primarily due to refunds from its pipeline company suppliers. In addition, the company proposed rate reductions and changes intended to increase sales to businesses which can use other fuels. As natural gas prices increased, more customers found it difficult to pay their bills. Various federally funded or mandated and company-sponsored programs were made available to assist consumers. These programs included local restrictions as to when service could be disconnected, provisions for restoration of service, financial assistance to help customers pay current bills, and energy conservation assistance.