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Questar rate request 'unsubstantiated,' watchdog agencies say

Published: Friday, Nov. 8 2013 6:22 p.m. MST

In July, Questar Gas filed a request with the Public Service Commission of Utah for an increase of nearly $19 million. But watchdog agencies say the request is "out of the range of reasonableness."

Jeffrey D. Allred, Deseret News

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SALT LAKE CITY — The bartering process to determine how much thousands of Utahns will pay for natural gas service next year is underway in earnest.

In July, Questar Gas Co. filed a request with the Public Service Commission of Utah for an increase of nearly $19 million, which would increase the average residential natural gas bill by $1.36 per month. But the Utah Office of Consumer Services, the State Division of Public Utilities and other stakeholders are arguing that Questar should receive much less.

Questar’s revenue request is “greatly overstated and unsubstantiated,” the stakeholders wrote.

The Utah Office of Consumer Services, the state’s consumer watchdog agency, said information supplied by the utility indicated that the final amount will likely be millions less than the $19 million request.

“Our initial position is we've found (millions) in adjustments to their request,” said Michele Beck, the agency's executive director.

The Division of Public Utilities proposed an increase of only about $4 million, while the Utah Association of Energy Users noted two large adjustments to reduce the proposed increase by $5.37 million — both significantly less than Questar’s initial request.

Beck said that within its rate increase submission, Questar requested a rate of return (profit level) that was substantially too high in today’s financial environment. The utility asked for 10.35 percent, but the consumer affairs office has recommended 9.3 percent — $8.9 million less, while the Division of Public Utilities is recommending 9.45 percent — a $7.6 million revenue impact.

"They have clearly asked for a level of return that is out of the range of reasonableness," Beck said.

Questar’s request includes mistakes and oversights that overstate revenue needed, according to Beck. Additionally, all three watchdog agencies noted a $3.8 million issue in which Questar used an incorrect discount rate in calculating certain expenses.

The parties also identified other “mistakes and oversights” that should further reduce the amount of rate increase, though the level of oversight was not unreasonable, Beck said. Questar’s request overstated the infrastructure investments the company plans to make and personnel costs, she added.

Meanwhile, Beck said her office is not opposing the recovery of investment in infrastructure costs.

"(However) we are opposed to overstating the investment. It is also important to note that since the last rate case in 2009, over $19 million in new investment has been added to customer rates," Beck said. "This has been a rate increase of about 2 percent a year due to those costs, but customers have not felt that increase because it has largely been offset by lower (natural gas) costs.”

In the wake of the objections raised by the Utah Office of Consumer Services and other stakeholders, Questar is looking into what changes might be necessary to reach a mutually agreeable compromise.

“We’re in the process of trying to work out what we think is reasonable,” said Barrie McKay, Questar vice president of regulatory affairs. “To (speculate) on what (Questar) will ultimately get would be premature.”

McKay said the utility will spend the next several weeks reviewing stakeholder comments and trying to determine what adjustments, if any, could be made.

A final decision on the rate case is expected from the Utah Public Service Commission early next year. New rates would take effect in March. The utility serves about 900,000 residential and business customers in Utah.

“The bottom line for Questar is to make sure that we have a fair rate of return and fair, reasonable rates to continue quality service to our customers,” said Questar spokesman Darren Shepherd.

E-mail: jlee@deseretnews.com, Twitter: JasenLee1

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