On a straight partisan political vote, California regulatorsyesterday approved rate relief for beleaguered Southwest GasCorp.’s cost-overrun plagued development of a new natural gasdistribution system for the Sierra Nevada foothill town of Truckee,CA, about 50 miles east of Sacramento in the northern third of thestate.

A holdover majority of California Public Utilities Commissionmembers appointed by former Gov. Pete Wilson approved a courtsettlement between Southwest and Truckee residents a 3-2 vote.

The controversy surrounding the five-year delay in completing anextension of natural gas service to the remote town on the way tothe Lake Tahoe gambling and recreation area goes back to 1994 whenthe CPUC granted Southwest a certificate to be the town’s firstnatural gas distribution utility. The regulators put a cap of $29million on the distribution pipeline system Southwest wanted tobuild.Subsequently, the CPUC ordered Southwest to complete thedistribution pipeline network on an expedited basis; the utilitysought relief in the courts instead.

Southwest exceeded the expense cap before the system wascompleted, precipitating lawsuits between the city and the LasVegas-based utility, which serves remote desert and mountain areasin the eastern half of the state, along with larger parts of Nevadaand Arizona. Following Southwest’s last filing in federal court, anout-of-court settlement was reached between the citizens and theutility.

Cost overruns “were precisely those charges for which SouthwestGas had assumed the risk,” said Carl Wood, one of the two recentCPUC appointees by California’s new governor. “At that point,citizens of Truckee opposed Southwest; today they support theeffort of the utility to lift the price cap and thereby raise localgas service rates.

“I would like to express my strong dislike for the tactics thathave been used to brow-beat the residents of Truckee intosupporting a position they vehemently opposed 18 months ago, and Iwant to re-affirm my supposrt of the cost-cap concept (capitalinvestments). It is my expectation that utilities will live up totheir commitments.”

In leading the majority that approved the deal, CommissionerHenry Duque said he didn’t like Southwest’s overruns, but in orderto get the new gas service as quickly and cost-effectively as theregulators could, he supported the settlement with contingencies,such as Southwest making regular progress reports and setting adate-certain for completing construction.

The other newest CPUC member, Loretta Lynch, who is expectedsoon to be named president of the commission by Gov. Davis,expressed reservations about okaying the settlement because of the”chilling effect” that might be created for other municipalitieswho want to challenge CPUC-regulated utilities in court cases.Nevertheless, Commissioner Josiah Neeper, a lawyer, said, “there isnothing in the record to suggest the residents were coerced.Acceptance of the settlement by the people of Truckee wasvoluntary.”

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