Opinion ID: 2622975
Heading Depth: 2
Heading Rank: 2

Heading: questar ii

Text: ¶ 6 On December 17, 1999, over a year before we issued Questar I, Questar filed a general rate proceeding with the Commission, which included a request under Utah Code section 54-7-12(3)(a) for interim rate relief of over $7 million annually to cover the CO2 plant operating costs. [12] Questar did not, however, seek approval of its contract with Questar Pipeline. [13] The Commission held a hearing to consider this request for interim rate relief and granted the request on January 25, 2000. [14] Consumer Services petitioned the Commission for rehearing regarding the interim rate increase, arguing that the increase was not legally proper, factually supported, or in the public interest. [15] By declining to respond to Consumer Services' request, the Commission affirmed its January 25 order. [16] ¶ 7 On June 2, 2000, Questar and the Division filed a stipulation that resolved between them the issues of cost recovery and ratemaking treatment of gas processing costs and provided that annual CO2 plant costs in the amount of $5 million should be passed on to ratepayers. [17] Although Consumer Services objected to the cost recovery stipulation, the Commission approved the stipulation on August 11, 2000. [18] ¶ 8 In approving Questar's cost recovery, the Commission determined that it need not rule on whether Questar's decision to contract with its affiliate Questar Pipeline was prudent. [19] The Commission acknowledged that Questar's prudence in this matter remained the most troubling question and that the burden to demonstrate prudence was on Questar. [20] But the Commission relied on a safety exception to excuse Questar from its burden to demonstrate the prudence of its contract and CO2 processing costs. [21] The Commission determined that once coal seam gas became a persistent threat to the [heat level] of [Questar's] gas supply, customer safety was threatened and an effective response was mandatory. [22] The Commission reasoned that it could decide the legitimacy of recovering CO2 plant processing costs from ratepayers without determining whether the underlying affiliate contract was prudent because Questar had not specifically applied for a decision on the affiliate issue. [23] The Commission then accepted the argument that $5 million per year, or 68 percent of the costs of CO2 processing, represented a fair and reasonable settlement of the cost recovery issue. [24] ¶ 9 In Committee of Consumer Services v. Public Service Commission (Questar II), we held that the Commission had abused its discretion by failing to follow its established practice of requiring a prudence review of rate increases and affiliate transactions. [25] We stated that by approving the cost-recovery stipulation without considering the prudence of the underlying source of the costs the contract between Questar and Questar Pipelinethe Commission had abdicated its responsibility to find the necessary substantial evidence in the record in support of the proposed rate increase. [26] We did not determine, however, whether Questar was prudent in entering the affiliate contract and incurring the CO2 processing costs. ¶ 10 On remand, the Commission found in an August 30, 2004 order (the 2004 Order) that Questar had failed to meet its burden of proving the prudence of its rate increase and affiliate transaction. As a result, the Commission barred the cost recovery that Questar sought during the period from June 1999 to May 2004. The Commission also found that Questar's actions did not produce any unique economic benefits to Utah ratepayers justifying a cost recovery. By its own terms, however, the 2004 Order did not foreclose the issue of whether Questar could seek recovery of future CO2 processing costs. Indeed, the 2004 Order anticipated opening another docket to develop a long-term plan to deal with the hazards of CBM and Questar's obligation to provide safe and cost-effective services to its customers. This plan was further supported by the Commission's October 20, 2004 order (the Clarification Order), which stated that the 2004 Order does not preclude Questar from seeking recovery of CO2 processing costs in other dockets. The Clarification Order merely reiterated that any future cost recovery would be subject to the appropriate prudence review.