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PSC approves Questar rate boost

Gas company to get most of the $17.8 million it had sought

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Questar Gas consumers will be paying more for their service in the wake of Friday's rate increase approved by the Public Service Commission.

Questar will not get the entire $17.8 million annually it had sought but will get most of it — $13.5 million — barring appeals from interested parties.

The typical customer saw the rate rise by $8.50 annually in January when the commission conditionally granted part of Questar's request. Friday's action will bump up bills another $8.50 annually, for a $19-per-year rise. The typical homeowner will now pay $620 annually.

The Committee of Consumer Services, which represents individual and small-business customers, had said Questar needed only a $7.2 million increase. The Division of Public Utilities, a state agency that balances the interests of consumers and public utilities, had pegged the company's annual need at $12.8 million.

The committee had opposed any rate increase that helped pay for a carbon dioxide processing plant near Price. A Questar affiliate built the plant, which removes excess carbon dioxide from natural gas. The resulting gas has a higher BTU, or British Thermal Unit, which burns better in appliances in Wasatch Front homes and which Questar says is safer for those appliances to use.

But the commission accepted a stipulation between the Division of Public Utilities and Questar that calls for $5 million annually over five years to be used to defray the plant's costs. Questar originally had sought $7.4 million annually. The amount could fall if annual audits show actual expenses are less than $5 million per year.

"Overall, we are pleased with the commission's decision and see it as a step in the right direction," Questar Gas President and CEO Nick Rose said in a prepared statement. "In particular, recognizing the necessity of safety-related actions we took when we contracted for gas processing is an important signal . . . The processing on our southern system is an essential safety measure, and these significant costs need to be covered."

Roger Ball, administrative secretary for the Committee of Consumer Services, said he was "kind of disappointed" with the order and said the committee will decide over the next few days what action, if any, it would take.

Parties have 20 days to petition the commission to reconsider its order and they also can appeal the order to the state Supreme Court.

"I think the commission was between a rock and a hard place on the CO2 issue," Ball said.

He emphasized that the committee believes Questar, and not its customers, should be responsible for the financial consequences of a poor business decision, which the committee feels the plant represents. "A utility company should not be any more immune from that process than an Ernst or ZCMI should be," he said.

Commission Chairman Stephen Mecham disagreed with other commissioners on the plant stipulation, saying Questar should have taken the plant issue first to the Federal Energy Regulatory Commission. "The dispute over the plant never would have arisen had that occurred," he said in the order.

Last year, the PSC denied the company's request to recover plant costs through a semiannual "pass-through" rate case. Pass-through cases allow the company to adjust rates to reflect changes in gas costs, while the more-rare general rate cases cover the company's non-gas costs, including the costs of operating and maintaining the company's distribution system.

But the commission in January granted interim rate relief for the processing costs, totaling $7 million.

The order issued Friday also establishes an 11 percent return on equity, saying it was a "reasonable" return for Questar shareholders, and a weatherization program to encourage resource conservation.

Rose said Questar was disappointed with the rate-of-return figure, saying "it doesn't reflect the need for higher returns in what has become a more risky and competitive business — especially in light of higher interest costs."

Rose also noted that the company "will have to continue focusing on reducing costs by changing some of the things we do," but he did not provide details.

Questar Gas, a subsidiary of Salt Lake-based Questar Corp., filed for a $22.2 million rate increase in December but agreed to lower its request to $17.8 million after meeting with the committee and the division in June.

Questar's last general rate increase was in 1995 and amounted to $3.7 million. Company spokesman Chad Jones noted, however, that the increases were collected only from large gas transporters and customers building new structures. The last across-the-board type of general rate case was in 1985. That one brought an extra $5.1 million to the company annually, equating to an average increase of $20 per residential customer.

E-mail: bwallace@desnews.com