Propane Confusion Reaches Conclusion in Mammoth Lakes

Under threats similar to those made at the Dec. 17 Mammoth Lakes Town Council meeting, Rock Creek Energy brought forward its request to have its franchise agreement with the Town of Mammoth Lakes transferred to AmeriGas at the Jan. 7 meeting. Rock Creek claimed that unless Council voted to approve the transfer right then and there, the deal would fall apart and the Town would be stuck with Rock Creek Energy, which according to many locals has not been a cooperative company to work with over the years.

The big point of contention in this deal was coming from a competing company, Turner Propane, who lost the bidding war for Rock Creek Energy and is now calling foul play in the transfer that they believe will be anti-competitive.

Rock Creek Energy has been invested in the franchise agreement with the Town for 5 years, and the agreement has a shelf life of 20 years. Long time local John Vereuck told Sierra Wave that Rock Creek put in their propane lines in 2001. These lines went across the public right-of-way without asking the Town. Turner Propane was unhappy with this situation, therefore causing the need for the Town to enter into the franchise agreement.

After close to three hours of discussion on the topic, including a closed session item, Council boiled down the issues to five topics: transparency in the process related to a 32 cent carrying fee, what to do with lateral fees (fees related to the large lines that feed the rest of the system), the L2 connection factor (a charge for connecting at high altitude), a redress form for the public, and whether or not the companies would agree to cooperate with geothermal in the future if it ever came online in Mammoth Lakes.

With time creeping in on Council's 10:30 p.m. bewitching hour, and the onslaught of lawyers present being unable to agree, Council decided to move the meeting to the following evening to finish up. By the next night a new resolution had been drafted.

The first two issues received the most attention, with the remaining three going by the wayside. Council believed they and the public were entitled to see a capital recovery analysis that Rock Creek Energy had, which showed why the fee to customers of 32 cents per gallon transported was set at that price. The transport fee is set up as a means to help the owner of the backbone system recover the cost that they put into installing the system, as well as continued maintenance to the system. Council wanted to see the numbers that proved 32 cents was the correct fee. Rock Creek Energy representative, Scott Baugh had agreed to give those numbers to Council and the public once the transfer was approved. Local attorney David Baumwohl wanted to make sure that the transport fee would continue to be based on what Rock Creek Energy paid for the original system.

"The acquisition cost should not be included in the 32 cent fee," Baumwohl said. If Rock Creek paid $3.5 million and AmeriGas buys them out for $6 million, the fee should only be charged on the original installation of the system. Council stated that this issue would be dealt with if AmeriGas ever came back with a proposed increase to the fee.

The issue of the lateral fees being zeroed out was confusing to Councilman Skip Harvey and Baumwohl. Both men wanted all lateral fees throughout town to be zeroed out, however, the deal that AmeriGas had agreed upon was that the laterals at Juniper Ridge and the Timbers would be the only two that would have their fees zeroed, regardless of who their supplier is. Any other lateral in town that Turner Propane would want to use would trigger the need for AmeriGas and Turner to sit down and create a written agreement on the terms of the use.

The resolution also stated that Rock Creek Energy would pay the Town $40,000 to cover the cost for Triad Engineering to improve the "As-built" plans, as well as another $108,495 to cover the cost of road and street repairs related to Rock Creek's shabby job at pipeline trenching. Lastly, AmeriGas will be expected to provide a written commitment to the Mammoth Lakes Fire Department that they will install an additional agreed upon number of isolation valves in the existing distribution system.

Council approved the resolution with a 5-0 vote.

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