Utah utility regulators have put the kibosh on a Questar Gas Co. plan to limit its liability for hundreds of faulty data transmitters it installed on gas meters throughout the state while requiring its customers to pick up much of the expense.

The Public Service Commission late Wednesday issued an order generally approving a settlement that Questar hammered out in July with the state's Committee of Consumer Services and the Division of Public Utilities that was designed to put the problem of the faulty transmitters behind the company.

But the PSC added one important caveat: Questar will not be allowed to pass on more than $377,000 of the cost to all of its 840,000 customers. Instead, it must cover that amount itself. Had Questar gotten its way it would have collected about 40 cents from each of its customers to help it correct the problem.

"We're disappointed with the order," said Questar spokesman Darren Shepherd. "Automated meter reading is more than 99 percent accurate and provides substantial benefits to our customers, but we're being penalized for not being perfect."

Questar started installing the transmitters on its gas meters attached to customers' homes and businesses 10 years ago. The transmitters, known as transponders, allowed company trucks driving through residential neighborhoods and business areas to automatically record each site's natural gas consumption. However, the transponders on nearly 600 of its customers' homes and businesses were only reporting about half of the natural gas that was used.

Earlier this year, state regulators were flooded with complaints from Questar customers upset that the utility was trying to retroactively bill them for up to two years of natural gas usage. They blamed the utility for the problem, and many believed they shouldn't have to pay.

Under the settlement agreement approved by the PSC, the 580 customers who were underbilled will only have to pay for six months of usage instead of two years -- or a total of about $224,000.

But Questar, which only offered to pay $480,000 to correct the problem, also will have to pick up the $377,000 it wanted all of its other customers to pay.

"Where [under-billing] results from a measurement error … we do not understand why any portion would be borne by other customers," the PSC wrote.

Shepherd said Questar attorneys will be meeting with representatives from the Committee of Consumer Services and Division of Public Utilities to discuss the PSC's order. He left open the possibility that Questar may appeal the PSC's ruling.

"We believe this [the PSC's order] will cost customers more in the long run," he said. "To get us to 100 percent -- perfection -- is going to require more people and more processes."

Longtime utility watchdog Roger Ball was among those who spoke against the settlement agreement when it was presented to the PSC for approval. He argued it wasn't fair for Questar to try to pass on part of the cost of correcting the problem to the bulk of its customers.

"When installing new technology like that, anybody with half a brain would have run the two systems [manual meter reading and the computerized meter reading] in tandem with each other for a month or so to make sure there weren't any errors," Ball said. "This all could have been prevented had they taken the time to do that when they still had the employees on board to read each meter individually."