Oct. 17--Dominion Peoples Gas once again has hit a snag on the path to new ownership.

An administrative law judge with the state Public Utility Commission on Friday rejected a settlement that would have been a key step in SteelRiver Infrastructure Partners' plan to purchase the Pittsburgh-area gas distribution company.

SteelRiver is the successor to Babcock & Brown Infrastructure Fund North America, which announced a deal in July 2008 to buy Dominion Peoples and another utility, Dominion Hope in West Virginia, from Dominion Resources Inc. of Richmond, Va., for $910 million.

Judge Robert P. Meehan said the denial doesn't require the PUC to decide whether the San Francisco-based fund's application to buy Dominion Peoples should be approved or denied.

Instead, the case goes back into the PUC's process of hearings and litigation. The partners and original critics who agreed to the settlement could come back with a new settlement that answers Meehan's concerns, PUC spokeswoman Jennifer Kocher said. There is no deadline for an outcome.

Dominion spokesman Dan Donovan said yesterday the company is reviewing the decision, and had no comment. SteelRiver representatives couldn't be reached for comment.

PUC staff objected to the deal, citing concerns that SteelRiver never adequately responded to questions about its technical or financial fitness to run the company, which serves 359,000 customers in the region, Meehan's order said.

Staff contended the settlement doesn't ensure long-term protection to the company or ratepayers, noting that SteelRiver as it was formed "has a limited life of 20 years."

The SteelRiver agreement followed an earlier bid by Equitable Resources Inc., now EQT Corp., to buy the two companies. The Equitable deal was scuttled in January because federal regulators considered it a potential monopoly.

The Federal Trade Commission battled to block that $970 million sale on antitrust grounds, because Dominion Peoples and Equitable Gas compete to serve office buildings, hospitals and other big customers in the Pittsburgh area.

Kim Leonard can be reached via e-mail or at 412-380-5606.

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