Questar Gets Its Way in Utah
But the governor gets burned in the fallout.
Utility regulation almost never enters the public consciousness. But when it does, it most certainly means trouble for politicians. Consider Utah's governor, Mike Leavitt. As spring turned to summer, he found himself driven into a corner. And Questar Corp., the apparent winner in the melee, helped put him there.
The debate hardly seemed worth the trouble-an arcane piece of legislation dealing with the powers of the state public service commission (PSC) and the representation of consumer interests-an issue so technical as to offer little in the way of political upside. But add in the appearance of a conflict of interest and watch how the screw turns. Leavitt first recused himself, refusing either to sign or veto the measure, which allowed the bill to become law under Utah practice. Yet even that retreat was not enough. Though the law was set to become effective only after the passage of a year, the uproar simply would not die-especially since, as time passed, it appeared that Questar and its stockholders were reaping all the profits. That left some to say that Leavitt's political future and that of several legislators hung in the balance, forcing the governor to take the offensive, promising to make PUC reform a top priority in the coming year and even to call a special session of the legislature, if that's what it takes.
All this over obscure legislation known simply as House Bill 320.
Lobbying to Reduce Consumer Clout
State legislator David Ure sponsored HB 320, though the bill was drafted by Questar in response to what company management felt was a tough regulatory climate that drove down the company's stock price. Apparently, the utility and others felt the PSC had become bogged down and could not respond fast enough to utility hearing requests to accommodate a more fast-paced competitive environment. A part of the problem, various PSC critics contended, was that the proceedings at the PSC had become too adversarial, especially because of the interference by the Committee of Consumer Services. That consumer watchdog intervened in cases to represent consumer interests. It was created in 1977 and regularly took part in rate cases to ensure that utilities weren't overcharging for services.
The solution in HB 320, offered by Questar and backed by US West and PacifiCorp, was to abolish the Committee of Consumer Services. It was to be replaced by the new Office of the Public Advocate, created from the blending of some functions of the former Committee and the state Division of Public Utilities. HB 320 calls on the new Office of Public Advocate to balance the interests of consumers and utilities before taking a position, rather than advocating for the consumer.
Of course, the real result of the proposed demise of the Committee of Consumer Services, depends on who you ask. Utility lobbyists and pro-utility legislators argue that the result would be streamlined utility regulation from elimination of inefficiencies and waste in the regulatory process. Consumer advocacy groups argue 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. Ruland Gill is a Questar corporate attorney and lobbyist whose senate bid was highly criticized. And while Gill acknowledged that his candidacy had become a rallying cry for objectors to HB 320, he said he decided not to run for family reasons.
But Gov. Leavitt, stung by allegations that he used his office to benefit a family member, said the game wasn't yet over. Leavitt asked legislative leaders to make HB 320 a top priority in the coming year, involving the PSC, utilities, and ratepayers. He promises a new bill with significant consumer protections, and said he would force a special session until such results are forthcoming. In fact, the Democratic party in Utah has promised to use HB 320 to increase its votes during legislative and gubernatorial elections this fall. And even Leavitt has acknowledged HB 320 could impact the outcome of close elections.
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