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West Wendover Mayor Donnie Anderson vetoed going forward with the purchase of Wendover Gas a day after city council voted to go ahead with the controversial buy out of the troubled company.
“As much as I feel sorry for Nancy (Wendover Gas owner Nancy Green), I can’t justify the city spending $2.4 million and get into the propane business, especially not when we have other suppliers coming to town.” Anderson said Wednesday. “I know there is talk about hooking up to the (natural gas) pipeline but shouldn’t that also be a private business venture instead of the city?”
In Tuesday’s meeting the council voted to accept the appraisal numbers for the gas company and spend up to $18,000 for a feasibility study on whether the City of West Wendover could operate the financially distressed company for a profit.
According to Anderson the ‘high’ valuation for Wendover Gas was estimated to be $2.4 million.
While Councilman Mike Mierra expressed reservations about taking over a private business only councilman Izzy Gutierrez voted against going forward with the feasibility study.
“I have always been opposed for the city competing against private business,” he explained.
A major supplier of propane in Wendover for almost half a century, Green created Wendover Gas in 1997 and began piping propane to some residences and businesses.
In order to secure funding and right of way to lay the pipes Green and the city agreed on a franchise ordinance that gave Wendover Gas a monopoly on all piped gas. Where the ordinance falls short Green complained to the council is that the monopoly applies only to piped gas. There is nothing in the ordinance that prevents a business or a home from buying propane from another supplier and filling a tank on a regular basis.
Also by installing gas lines, Green’s pricing came under the jurisdiction of the Public Utilities Commission which had to approve each and every price adjustment Green wanted to make, while any potential competitor could slash the price of propane they were charging at a moment’s notice.
And that is exactly what happened. Where she once had all of the five major Wendover casinos as her customers Green said now she had none.
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While Green lost most of her major commercial accounts she has been able to retain most of her residential customers. PUC investigators made frequent mention of supply problems in 2005 and in 2007. In 2009 Green was just days away of losing her company to the city when at the almost the last minute she was able to secure a new source of propane after her original supplier refused to deliver more until he had been paid at least half of a $140,000 bill.
Last December the city council was informed that Wendover Gas was some six months behind on its franchise fee payments by City Manager Chris Melville.
“They are behind two quarters,” Melville said at the time. “And those were light quarters during the spring and summer when the demand is light. For the year the franchise fee is about $60,000.”
West Wendover also charges a franchise fee to a variety of companies providing utilities to the public such as the telephone company, the electric company, cable television and cel phone providers.
In addition to being the smallest company assessed a franchise fee, Wendover Gas is also unique from the rest because it must by a physical product, gas, from a wholesaler and store it on site.
If the city purchased the company it would be in direct competition with other privately owned and operated propane suppliers in West Wendover such as Amerigas.
However the city may not be interested in selling propane but rather natural gas. A plan reflected in correspondence between Paul Kvam and the High Desert Advocate this March.
“As a financial analyst, I audited and worked on Wendover Gas before I retired from the PUC in June 2009. To this day, I do not know why Nancy Green built the system. It was doomed to failure from the beginning.” Kvam wrote. “Reading Staff’s original report and pre-filed testimony on Green’s application for a license, I concluded it was full of hopeful assumptions as to system load (sales of propane) and unrealistic profit potential. I once asked Nancy during an audit why she built it in the first place and she said that another party had made preliminary plans to build it and she didn’t want this party to destroy her business.
Well, she ended up building it, and destroying her business! I do believe that a system in Wendover could be successful. First, I would have to be connected to the Ruby pipeline in the north and sell natural gas. Second, everyone (West Wendover & Wendover, UT) would have to connect to it. Natural gas is real cheap these days and its savings, in compared to propane, would pay for the line. Natural gas would diversify the Wendover economy by bringing in new business and saving existing businesses big money in the long run. I’ve talked to Chris Melville about the need to get natural gas into Wendover and others, so I hope I made an impression. The disadvantage natural gas has in Wendover is that Wells Rural sells BPA power real cheap there. But, as sooner you folks go to natural gas, the faster the savings will occur and the better off the community of Wendover will be.”
“I am very uncomfortable about the city buying the gas company and then possibility over building a pipeline and getting into the natural gas business,” Anderson said. “If a private company decided it made sense then it would have my full support but to commit our tax payer dollars to that project, I just don’t know.”
According to very preliminary estimates a pipeline to the Ruby line could run into the tens of millions of dollars.
