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News Analysis

But the governor gets burned in the fallout.
Fortnightly Magazine - July 1 2000

that the entire regulatory process in Utah will change to the dismay of the ratepayers, who certainly will face higher rates.

When HB 320 was first proposed early in the 2000 legislative session, it drew a firestorm of complaint. Legislative debate was rancorous, pitting pro-utility legislators against pro-consumer legislators. And the political background was loud too. For example, some claimed that Questar had set its sights on killing off the consumer committee because it had alerted the PSC to an attempt by Questar to add $2 million into rates to allow it to make donations for the 2002 Winter Olympic Games. Once it was revealed, Questar dropped the proposal. Also, as the debate continued, two Questar employees, one an influential lobbyist, announced plans to run for election to the part-time legislature. Some observers screamed about conflict of interest, because if elected they would remain Questar employees and yet vote on, among other things, the governor's appointments to the PSC.

Winning Stockholder Gains- Too Much, In Fact

Republican Gov. Leavitt had until mid-March to decide whether or not to sign the bill into law. Both sides lobbied his office heavily. But one more political bomb remained to be dealt with. It turns out that the governor's father, former Sen. Dixie Leavitt, is on the board of directors of Questar and owns around 33,500 shares of Questar stock, with options on even more. Many perceived a conflict of interest, especially because one of the aims of the legislation was to provide a boost to Questar's sagging stock prices.

And how did Questar stockholders fare?

After the price of Questar stock (NYSE symbol "STR") hit a low for the year of $13.56 per share, during the week before HB 320 became law, it began to rise, hitting about $19 on May 15. Analysts attributed the increased stock price to an improved regulatory climate. Questar stock was still hovering at about $20 on June 6. As of that date the CBS "Marketwatch" online financial news service was rating Questar stock the best-performing gas utility issue during the prior three months. On May 19, Prudential Securities had upgraded Questar stock from "hold" to "accumulate."

Leavitt's response to the additional controversy was to take no action. But by not signing the bill into law, the bill became law on its own. Yet Leavitt's careful inaction failed to douse the flames.

A Would-Be Legislator Takes the Heat

HB 320 does not go into effect until July 2001-more than a year after its enactment. But on April 19, at the first meeting of the 2000 Public Utilities and Technology interim committee, the legislation again fell under scrutiny. State Rep. David Ure, the bill's sponsor, who earlier had written guest editorials to newspapers promoting the bill, now agrees that HB 320 likely will be amended prior to its effective date. The committee now plans to make HB 320 its main focus this summer, with preliminary amendment recommendations expected by August.

Meanwhile, on May 5, one of the Questar employees running for the state senate decided to drop out of the race.