6. Recovery of Inspection Costs

Applicant states that, due to the fact that D.00-06-038 placed responsibility on it for compliance with all applicable state and federal codes and regulations when contractors install EQVs on its facilities, it must inspect all installations not previously inspected. This will result in approximately 52,000 inspections at a cost estimated not to exceed $400,000.

Applicant has begun its inspection program. As of December 17, 2000, it had performed 9,600 inspections. The inspections revealed 308 (3.2%) minor leaks and 87 (0.9%) cathodic protection deficiencies. The majority of the minor leaks and deficiencies occurred on EQVs installed prior to implementation of new standards that took effect on October 1, 1998. Applicant states that none of these minor leaks or deficiencies constitutes a serious safety issue or presents an immediate safety hazard. Applicant expects the results of the remaining inspections to be similar.

The customers and contractors who participated in the program chose to do so based on the rules and charges in effect at the time. Therefore, Applicant believes that charging the inspection costs to current participants would be unfair. Instead, Applicant proposes to recover the costs from all core customers. It says that the cost to individual core customers would be miniscule. Applicant states that there is a rationale for allocating the costs to all core customers because the inspections may avoid a mishap that could affect members of the public in the vicinity of a customer with a faulty EQV installation. None of the protestants addressed the inspection cost issue.

We will deny the application with respect to recovery of inspection costs. Applicant has not demonstrated that the costs of further inspections are properly recoverable from core customers.

This is a program that was to be paid for by the participants who benefited from it. However, Applicant believes that charging the further inspection costs to participants would be unfair. Program participants decided to participate based on the costs specified at the time. If the additional inspection costs were to be charged to participants, Applicant would be changing the terms of the program after the fact. Had the participants known of the additional costs at the time, they may have chosen not to participate in the program. Therefore, we agree that to impose additional costs now would be unfair. However, this does not justify recovery of those costs from core customers.

If it would be unfair for program participants who benefited from the program to pay for the additional inspections, it would be much less fair to require ratepayers who did not benefit from the program to pay for them. While the Applicant must take all steps necessary to ensure the continued safe operation of these installations, it must rely on existing program revenues for this purpose.