Public utilities commission denies SW Gas’ request for stay
Southwest Gas Corporation lost another round with the California Public Utilities Commission last week in its bid to delay construction of the third phase of gas line installation in Truckee.
On Sept. 21, commissioners denied a Southwest Gas motion to stay the CPUC’s July decision, which ordered the company to proceed immediately with its project in Truckee as originally planned.
The corporation decided to file a complaint against the Town of Truckee in federal court following denial of the stay, according to the Southwest’s attorney, Gregory Dyer of Sacramento.
“We decided to hold off and see if the CPUC would stay its decision,” Dyer said. “We got the word on that last week, and now intend to move forward with litigation.” Dyer said he planned to file the federal complaint next week.
The Truckee Town Council two weeks ago rejected a claim by Southwest Gas for $15 million in damages.
The CPUC noted in its denial decision that it found no good cause for a stay, and stated that Southwest’s allegations that denial of the stay would cause irreparable harm were “vague and unsupported.”
The commission also took exception to Southwest’s claims that no meaningful construction will occur this year on Phase III because of the town’s repaving schedule and the short construction season.
“We considered these very factors in [the earlier ruling] when we ordered Southwest to proceed with the project with all deliberate speed, and continue to so order here,” the report noted.
Thomas Sheets, vice president/general counsel of Southwest Gas, said the commission’s decision was a disappointment, but the corporation accepts it.
Although the stay was denied, Sheets pointed out that the commission has not yet taken action on Southwest’s request for a rehearing.
“The reality is that we have continued to engage in activities in Truckee since the commission’s order in July,” Sheets said. “We have acted in good faith in proceeding with the project since the commission’s order.”
Claim against the town
Southwest in its claim against the Town of Truckee alleged that the town violated the corporation’s constitutional rights, breached its franchise agreement with the corporation and interfered with the contractual relation between Southwest and the California Public Utilities Commission.
The corporation also alleged in its claim that the town intentionally and negligently interfered with Southwest’s prospective economic advantage from the construction project.
Southwest contends that the company was selectively held to a different standard than other companies involved in construction projects in Truckee, and that the conditions imposed upon it during construction led to cost overruns which continue to cause the firm to lose money in its project here.
Southwest claims that the town required it to restore streets to a better condition than they were before gas line installation commenced.
“As a direct and proximate cause of the Town of Truckee’s above-described conduct, Southwest has sustained and continues to sustain, damages in the form of substantially increased construction costs and a massive loss of profits, presently and in the future,” the claim states.
The CPUC ruled in July that Southwest should abide by its deal with Truckee ratepayers, when commissioners voted 4-1 that Southwest 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.
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.
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