Questar refund is likely

A five-year dispute between Questar Gas and state utility watchdogs has ended, and the result could be a refund of $28 million, or about $37 for each Questar customer.

On Monday, the Utah Public Service Commission said the Salt Lake-based utility was not entitled to recover costs associated with the building of a natural gas processing plant near Price. The plant was designed as a temporary solution for treating lower heat compositions of natural gas (or so-called coal-seam gas) being introduced to Wasatch Front homes.

While the state's Committee of Consumer Services watchdog group praised the commission's decision, Questar executives warned that the alternatives faced by the utility would end up costing ratepayers more in the long run.

According to the commission's order, safety concerns alone in building the plant, which removes a portion of carbon dioxide from natural gas, were not enough to justify passing its costs to Questar's roughly 750,000 Utah customers.

"Questar management effectively ignored the potential problems coal-seam gas posed for Questar Gas and its customers until 1998, when its safety concerns were so overwhelming . . . ," the commission's order said. "Five years into the CO2 removal effort, Utah ratepayers are left with an imperfect, costly and temporary solution to a long-term problem."

The case last summer made its way to the Utah Supreme Court and pitted Questar against the consumer committee, which was intent on ratepayers receiving a refund.

In August 2003, the court rejected Questar's rate increase, saying that the commission could not pass the plant's costs to customers on the basis of safety reasons alone. In December, the commission said the utility could have another chance to justify the increase, which resulted in additional hearings that led to Monday's decision.

"I think the order demonstrates the need for a vigilant utility regulatory process," said Reed Warnick, attorney for the committee. "They denied recovery, period, simply because the utility did not meet its burden of proof."

In a prepared statement issued Monday, Questar officials disagreed with the commission's findings and vowed to find other ways to protect Questar Gas customers.

"We're looking at a whole range of options as far as Questar Gas' operations going forward," said Curt Burnett, a spokesman for Questar Corp.