On March 4, after coming under extreme pressure to do something about Utah’s air pollution, Utah governor Gary Herbert put forth an initiative to convert motor vehicles to cleaner burning natural gas.
Herbert then worked with Senator Stuart Adams and Representative Jack Draxler to find a funding solution that would 1) raise huge amounts of new revenue without raising taxes, 2) force the average citizen to pay for it and 3) limit the cost to Herbert’s big business backers.
SB275, therefore, tasks Questar Gas with building the infrastructure necessary to covert the fleets of interlocal entities to natural gas. (Interlocal entities include city and county governments, school and special districts, the Utah Transit Authority, etc.)
In return, SB275 allows Questar to pass the costs that it incurs in the “expansion of the infrastructure and maintenance and other facilities for alternative fuel vehicles” to all of its ratepayers (customers) rather than to those directly benefiting from the services. This includes constructing, operating and maintaining natural gas fueling stations and related facilities for interlocal entities.
Most importantly, SB275 converts Questar into a virtual, state controlled enterprise fund that can be raided by interlocal entities to cover non-related political driven projects just as is currently done by cities with municipal owned power companies.
The bill also grants Questar a virtual monopoly on natural gas fueling stations and related facilities in return for the ability of politicians and interlocal bureaucrats to take potentially hundreds of millions of dollars from Questar ratepayers in coming decades.
As originally drafted and passed by the Senate, the cost to ratepayers would have been capped at $5 million per year. However, when the bill came to the floor of the House, Representative Greg Hughes who also serves as the, Chair of the Utah Transit Board of Trustees attempted to amend it in order to totally eliminate the cap. Removing the cap was reportedly opposed by Questar.
Although Hughes failed to amend the bill on the floor, he was later assigned to the conference committee that was charged with making SB275 acceptable to both the House and Senate. When SB275 finally came out of the conference committee, it had been amended to remove the cap on the amount that Questar could pass on to its rate payers after July 1, 2018 or at any time after the first year based on a determination of the PSC through the rate making process.
The Senate unanimously passed SB275 late on the evening of March 14. In the House eight of fourteen Democrats (Cosgrove, Duckworth, Hemingway, King, Romero, Seelig, Wheatley and Wiley) voted no on SB275 on final passage while only five Republicans opposed the bill (Johnny Anderson, Bird, Greene, Powell and Roberts).
Hughes’ inordinate interest in SB275 may be driven by the financial challenges faced by the debt ridden, taxpayer subsidized Utah Transit Authority (UTA) that he heads.
UTA will be able to use its high powered lobbyists with the likely backing of the powerful Salt Lake Chamber which also supports SB275 to remove the cap after the first year. These same lobbyists will then be able to force the PSC to raise gas rates in order to provide virtually unlimited funding for UTA and other interlocal entities.
This new source of funding is critical for UTA since it is much easier to strong arm the Public Service Commission than to obtain voter approval for higher sales taxes that would otherwise be required to cover increasing operational and financing costs. It also makes it easier for UTA to replace projected federal funds that will be lost due to efforts to control federal spending and debt.
Hughes’ efforts to access to Questar ratepayer funding is especially troubling given the serious financial problems UTA faces. According to a Legislative Audit:
- Debt Service Payments Will Consume a Great Portion of Future Sales Tax Revenues. This will in turn impose a financial strain on UTA.
- UTA’s Revenue Projections Are Optimistic; Expense Projections May Be Understated. Between 2010 and 2020, UTA projects a 60 percent increase in sales tax revenue, a 141 percent increase in federal operating subsidies, and a 125 percent increase in farebox revenue. In contrast, operations and maintenance (O&M) costs are forecast to increase by a much more modest 52 percent. In our opinion, UTA runs a risk of being overly optimistic.
By requiring Questar ratepayers to provide funding, the governor and legislators have eliminated the need for truth in taxation hearings or votes of the public on tax increases. In addition, they have shifted some of the burden for supporting UTA and other interlocal entities largely to individual homeowners who rely on natural gas for heating or who use electricity generated by burning natural gas.
Hughes, Adams and Draxler were careful to draft the bill in a way that leaves the Public Service Commission no alternative but to rubber stamp Questar claims for reimbursement of expenditures forced on it by interlocal entities. However, even more importantly, they have made it possible for powerful government and business interests to legally plunder Questar ratepayers through a never ending series of rate increases.
Since this is “free money” to the interlocal entities, demand will be infinite and Questar ratepayers will see their home heating rates constantly increase at a much higher rate than otherwise would have been the case. They will also see their electric rates driven up on the ever increasing percentage of electricity produced by natural gas.
Senior citizens on fixed incomes along with the working poor will be hardest hit by the rate increases while Utahns who are not Questar customers, will be totally exempt from subsidizing UTA and other interlocal entities.
Herbert, Adams, Draxler, UTA Chair Hughes and the legislators who voted for SB275 have effectively ensured that interlocal entities can pick the public’s pockets without ever raising taxes or being held accountable for their actions. This is a fundamental public policy change that relieves elected officials of accountability for their actions and further increases the state’s power over the citizens.