SW Gas files $15 mil claim | SierraSun.com
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SW Gas files $15 mil claim

JOHN A. BAYLESS

In a step toward possible litigation, Southwest Gas filed a $15 million claim with the Town of Truckee this week, holding the town responsible for cost overruns it experienced during its construction of natural gas lines here.”It’s not unexpected,” Wright said. “Southwest’s recent quarterly report to shareholders had about two and a half pages explaining the Truckee situation, and identifying the alternatives which Southwest could pursue. It’s interesting that out of the four options, none indicate that the company ought to do the right thing and go forward with the project as recommended by the California Public Utilities Commission.”Wright said the claim is the first step toward Southwest filing a civil lawsuit against the town.”Assuming we reject it, they have six months to then file a lawsuit,” Wright said. “We will submit the claim to our insurance coverage counsel, and would anticipate that they will reject the claim.”If the insurance counsel recommends rejection of the claim, it will then go before town council for consideration.”This is the first part of due process,” Wright said. “It will allow the opportunity for Southwest Gas to sue the town if they wish to do so.”Southwest in its claim alleges that the town violated the corporations 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 alleges 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.Southwest’s attorney, Gregory Dyer of the Sacramento law firm Jones & Dyer, said he also plans to file a complaint in federal court by Friday against the Town of Truckee.”Certain constitutional issues are not covered under the claims process,” Dyer said. “We plan to address those as quickly as possible.”He said the constitutional issues in the federal complaint include allegations that Southwest workers were treated differently from local contractors in the Truckee area.”It has to do with the handling of job sites, storage of materials, and treatment of Southwest’s workers, compared to other contractors doing the same sort of work in Truckee,” Dyer said. “We will produce the witnesses and documents to prove it.”The California Public Utilities Commission 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.Southwest Gas filed a motion in August to stay the CPUC decision which ordered it to proceed with its project here at the original price. The motion to stay the decision was filed in conjunction with a request for a rehearing of the commission’s decision on July 2 holding Southwest to the terms of its original agreement with the town.Sierra Sun E-mail: sun@tahoe.comVisitors Guide | News | Diversions | Marketplace | Weather | CommunityCopyright, tahoe.com. Materials contained within this site maynot be used without permission.About tahoe.com… 


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