Town considers impact of SW Gas merger on litigation
Truckee Town Council met in a closed session last week to discuss how the announced sale of Southwest Gas might affect the town’s relations with the company, which filed a $15 million claim against the town in September.
“We had a closed session where we talked about it,” Mayor Josh Susman said. “Basically, we discussed in the closed session how the announced merger would affect our negotiations with Southwest Gas. No decisions were made.”
Officials at Southwest’s Las Vegas office referred questions to outside counsel Greg Dyer of Sacramento, who was on vacation and unavailable for comment.
The terms of the transaction announced last week call for three Southwest Gas board members to join Oneok’s board, filling a current vacancy and two positions that will be vacated due to retirements in 1999. Southwest Gas will operate as a division of Oneok Inc. and will retain its name in the local markets it serves.
The transaction is subject to customary conditions, including approvals from Southwest Gas shareholders, state regulators in Arizona, California and Nevada, and the Federal Energy Regulatory Commission. The merger is expected to close during the fall of 1999.
Following the merger, Oneok would be the primary gas distribution company in Arizona, Kansas, Nevada and Oklahoma and would also have a strong presence in the state of California.
The company sought early last year to revise its deal with the town through the California Public Utility Commission’s Office of Ratepayer Advocates – increasing the surcharge and scaling back the project to exclude Donner Lake as well as parts of Tahoe Donner and Prosser. The increased rates would have added $17.6 million to Truckee ratepayers’ costs.
Parties to the proceeding, including the CPUC’s Office of Ratepayer Advocates, agreed upon a settlement to recover 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 rallied, and 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. 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 made their concerns known in letters and in presentations to the CPUC by town delegations.
Former mayor Kathleen Eagan and Attorney Jim Simon led the campaign to hold Southwest to its original deal.
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 specified in Southwest’s contract.
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.
The CPUC in September rejected the motion for a stay, and Southwest Gas filed the $15 million claim and later a federal complaint against the town, alleging that selective regulations enforced by Truckee caused the company to have a $15 million cost overrun while installing natural gas lines within the town limits.
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