CPUC rules in favor of Truckee
Truckee scored a big victory when the California Public Utilities commission ruled Southwest Gas should abide by its deal with ratepayers, and all eyes are on Southwest now to see whether the utility will carry through with its earlier threats of a lengthy appeal or legal action.
The CPUC came down squarely on the side of Truckee July 2, when commissioners voted 4-1 last week that Southwest Gas should proceed with “all deliberate speed” to fulfill its obligation to provide natural gas to all of Truckee for the price agreed upon in 1995.
In a press release issued shortly after the decision July 2, the CPUC stated that Southwest is already a year behind schedule with construction needed to expand natural gas service to this area, and noted that Truckee weather conditions permit work for only a short time each year. The commission ordered Southwest to resume its construction immediately and complete the project within a year.
For Truckee residents and town representatives who urged the CPUC to hold Southwest to its original agreement, the decision last week was an unqualified victory.
“The 4-1 vote was a clear victory for ratepayers,”said attorney Jim Simon, who aided former mayor Kathleen Eagan in her drive to hold Southwest to its promise. “Southwest is now unambiguously ordered to complete the project in accord with the original schedule and cost with no increase to ratepayers.”
He said he believes the ruling will stand up to any action Southwest takes.
Corporate Communication Manager Dante Pistone of Southwest Gas said the company has made no decision yet about its next action.
“No decisions have been made as yet,” Pistone said. “We are still looking at our options.”
“While they may file an appeal, our position is that the CPUC and the California Supreme Court would deny it,” Simon said. He said the next question is what action Southwest will take.
“We’re looking for a clear indication from Southwest as to their intent to proceed in good faith with the CPUC order, drop the threat of litigation and get on with the business of fulfilling their obligation to our community,” Simon said. “As Southwest’s board of directors reviews this matter, I hope they will see the wisdom of following through on their obligations. It would go a long way toward mending relations with our community.”
Council member Don McCormack praised the CPUC decision, but said the matter is not settled yet.
“It was a good decision for us, with the 4-1 vote to adopt the judge’s decision,” McCormack said. “However, it doesn’t mean anything will happen any time soon, because we have to wait and see what Southwest does.” He pointed out that Southwest still has two avenues of appeal left, to the CPUC and then the state supreme court.
“They [CPUC] did everything they could do,” McCormack said. “The question now is what action Southwest will take.”
State Sen. Tim Leslie also hailed the CPUC decision.
“I am extremely pleased that the members and staff of the PUC gave careful and thorough review of the town’s position,” Leslie said. “I was confident, yet hopeful, that the ruling would go Truckee’s way.”
Commissioner Henry M. Duque, who had urged other CPUC members to support the ruling holding Southwest to its deal, said their decision showed the agency was serious in its goal of treating utilities as businesses.
“Through these mechanisms we give management the flexibility to make decisions without micromanaging those decisions,” Duque said at the meeting July 2. “Just like we would not entertain a request to lower the cost cap if Southwest had beaten the agreed upon cost ceiling, we should not entertain increases to the cost cap. By this decision, you make clear that utilities should no longer look to us to absolve them when they make a bad decision.”
Southwest received approval from the CPUC in 1995 to expand its service territory in Northern California beyond the Lake Tahoe area, and Truckee was included in the plan. The utility originally agreed that it would recover from ratepayers no more than $29 million, including a 10 percent contingency for cost overruns. It agreed any costs above that amount would be recovered from shareholders.
Upon proceeding with the project, Southwest experienced significant cost overruns and sought CPUC approval in 1997 to scale back the project. The changes would have eliminated Donner Lake and parts of Prosser, and Tahoe Donner from the service area, in addition to collecting an additional $17.6 million from ratepayers.
Parties to the proceeding, including the CPUC’s Office of Ratepayer Advocates, agreed upon a settlement to allow most cost overruns from ratepayers. As part of the proceeding, the CPUC conducted a public hearing in Truckee in February, and the proposed settlement was discussed with potential customers. Truckee residents pointed out that they had modified their homes to receive the natural gas promised to them, but that 1,500 of them were now being excluded from the expansion, and they objected to the increased facilities charge from 12 cents to 18 cents per therm that would occur if the settlement were approved. Residents and representatives of the town expressed those concerns in letters and in presentations to the CPUC in San Francisco.
According to the commission, it is not known whether the cost overruns were reasonably incurred. Because of the proposed settlement, it was not determined whether they were the result of changes in government regulations, unforeseen changes in construction practices or excusable clerical errors in excess of the 10 percent contingency.
Commissioners also noted that it is not known what level of profit, if any, had been made by Southwest’s wholly-owned subsidiary construction firm, which has already received millions of dollars from the expansion project.
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