6. Discussion
6.1. Designation as a Public Utility
CVGS requests to be designated a "public utility" pursuant to Pub. Util. Code § 216(a) and § 222, which state in relevant part, as follows:
§ 216(a). "Public utility" includes every...gas corporation...where the service is performed for, or the commodity is delivered to, the public or any portion thereof.
§ 222. "Gas corporation" includes every corporation or person owning, controlling, operating, or managing any gas plant for compensation within this state, except where gas is made or produced on and distributed by the maker or producer through private property alone solely for his own use or the use of his tenants and not for sale to others.
As discussed in more detail below, today's decision grants a CPCN to CVGS to construct and operate a gas storage field for the purpose of selling gas storage services to the public. Therefore, we find that CVGS is a public utility gas corporation as defined by § 216(a) and § 222. As such, CVGS is subject to the Commission's jurisdiction, control, and regulation, and has all the rights and obligations of a public utility.
6.2. CPCN
CVGS requests a CPCN to construct and operate the CVGS Project pursuant to § 1001 et seq. We address the applicable statutory provisions below.
Section 1001 states, in relevant part, as follows:
§ 1001. No...gas corporation...shall begin the construction of a...of a line, plant, or system, or of any extension thereof, without having first obtained from the commission a certificate that the present or future public convenience and necessity require or will require such construction.
The Commission considers several factors to decide if "public convenience and necessity require" the construction of gas storage facilities. First, the Commission assesses the need for the proposed facilities. In D.93-02-013, the Commission held there is a presumptive need for gas storage facilities if the owners of the proposed facilities will not have a captive customer base and accept all financial risk.7 The CVGS Project meets these criteria.
More recently, the Energy Action Plan (EAP) II adopted by the Commission in October 2005 determined there is a need to develop in-state natural gas storage to enhance reliability and mitigate price volatility. The 2008 EAP Update affirmed this need.8 The proposed CVGS Project will help meet the need for additional gas storage facilities found in the EAP II and EAP Update.
No party contests the need for the CVGS Project. The market demand for the Project is evident from the response that CVGS received in its open season held in May 2008. CVGS reports that it received 17 bids for 26 Bcf of working capacity, or more than 200% of the planned 11 Bcf of capacity.9
Second, the Commission considers if the developer has the financial resources and technical expertise to construct and operate a gas storage field. CVGS clearly does. As explained in the Application, CVGS is a subsidiary of Nicor, a Fortune 500 company that owns a public utility gas company in Illinois with 150 Bcf of storage capacity in Illinois.10
Finally, the Commission considers if the proposed gas storage field will be constructed and operated in a way that protects the safety of workers and the general public. Here, the design, construction, and operation of the proposed CVGS Project will be subject to a comprehensive array of safety regulations at both the federal and state level, including the Commission's GO 112-E.
Pursuant to GO 112-E, at least 30 days prior to the start of construction of its pipeline, CVGS must file a report with the Commission's Consumer Protection and Safety Division, Utilities Safety and Reliability Branch (USRB) containing the information specified in GO 112-E, Section 125.1.11 Pursuant to GO 112-E, Section 125.2, CVGS must also file with USRB a report of any failures that occur during the strength testing of pipeline to be operated at hoop stresses of 20% or more of the specified minimum yield strength of the pipe used.
A complete list and summary of the applicable safety regulations is contained in Section 5.8 of the MND adopted by today's decision. We find these regulations will ensure a high degree of safety for employees and the general public.
We conclude for the previous reasons that public convenience and necessity require the construction of the proposed CVGS Project.
Section 1002(a) states as follows:
§ 1002(a). The commission, as a basis for granting any certificate pursuant to Section 1001 shall give consideration to the following factors:
(1) Community values.
(2) Recreational and park areas.
(3) Historical and aesthetic values.
(4) Influence on environment, except that in the case of any line, plant, or system or extension thereof located in another state which will be subject to environmental impact review pursuant to the National Environmental Policy Act of 1969 (Chapter 55 (commencing with Section 4321) of Title 42 of the United States Code) or similar state laws in the other state, the commission shall not consider influence on the environment unless any emissions or discharges therefrom would have a significant influence on the environment of this state.
CVGS provided the following information regarding these four factors:
1. Community Values. The CVGS Project will be located in a rural agricultural area. The closest incorporated city is Colusa, which is 11 miles from the compressor site. The City of Colusa has a population of approximately 5,698, and Colusa County has a population of approximately 21,302.
To inform the community about the Project, CVGS has been interviewed by a local newspaper on three occasions, and has made presentations at Colusa County Board of Supervisors meetings. CVGS also hosted two informational meetings that were widely advertised. Invitations were sent by U.S. Mail to (1) all identified landowners for surface rights and easements, (2) all elected and appointed officials, and (3) citizens who had requested that they be informed of the Project's status. Approximately 100 people attended the meetings.
CVGS estimates the Project will generate 370 jobs during the construction phase. Some of these jobs will be filled by local residents. Approximately five to seven permanent local jobs will be created at the Project site. The Project will also provide increased property tax and sales tax revenues.
2. Recreational and Park Areas. None of the Project is located on recreational and park lands. CVGS represents that the construction and operation of the Project will not affect, or interfere with the use of, any recreational and park areas surrounding the Project area.
3. Historical and Aesthetic Values. CVGS believes the proposed gas storage field is consistent with the site's historic use as a natural gas field. Further, in conducting its PEA, CVGS did not find anything of historic significance at the gas storage field site or along the pipeline easement.
CVGS acknowledges the Project will have visual aesthetic impacts, but these impacts will be mitigated to less than significant as described in the PEA.
4. Influence on the Environment. CVGS states the CVGS Project will not have a significant adverse influence on the environment for the reasons set forth in Chapter 3 of the PEA. The PEA is attached to its application as Exhibit D. Also, the MND adopted in this decision (discussed in Section 7) concludes that the Project will not have an adverse effect on the environment because the mitigation measures described therein assure that the Project's potentially significant environmental impacts will remain at less-than-significant levels.
Conclusion. We find pursuant to § 1002(a) that the CVGS Project is consistent with community values; will not adversely affect recreational and park areas; is consistent with historical uses of the Project site and community aesthetic values; and will not have a significant adverse influence on the environment. Our finding is consistent with, and informed by, the MND that is adopted by today's decision.
We conclude that the CVGS should be granted a CPCN pursuant to § 1001 and § 1002(a) to construct and operate the CVGS Project. The CPCN is subject to several conditions that are discussed below, and to the mitigation measures in the MND adopted by today's decision.
CVGS asks the Commission to waive the requirement in § 1005.5(a) to specify a cost cap for the CVGS Project. Section 1005.5(a) states, in relevant part, as follows:
§ 1005.5(a). Whenever the commission issues to an electrical or gas corporation a certificate authorizing the new construction of any addition to or extension of the corporation's plant estimated to cost greater than fifty million dollars ($50,000,000), the commission shall specify in the certificate a maximum cost determined to be reasonable and prudent for the facility. (Emphasis added.)
CVGS states the Commission has previously waived the requirement in § 1005.5(a) to specify a cost cap for independent gas storage providers like CVGS who bear all the risks for a project. There is no opposition to CVGS's request.
The clear purpose of § 1005.5(a), when read together with § 1005.5(d),12 is to set the maximum cost for a project that can be recovered from captive ratepayers. That purpose is not the relevant here. CVGS will not have captive ratepayers and will bear all financial risks for the CVGS Project. Thus, there is no regulatory need to specify the maximum cost for the CVGS Project. Consistent with Commission precedent for other independent gas storage projects,13 we grant CVGS's request to waive the requirement in § 1005.5(a) to set a maximum cost for the CVGS Project.
CVGS requests a waiver of the requirement in Rule 3.1(f) to provide certain cost data. Rule 3.1(f) states:
Rule 3.1(f). Applications, under Section 1001 of the Public Utilities Code, to construct or extend facilities shall contain the following information...(f) A statement detailing the estimated cost of the proposed construction or extension and the estimated annual costs, both fixed and operating associated therewith. In the case of a utility which has not yet commenced service or which has been rendering service for less than twelve months, the applicant shall file as a part of the application supporting statements or exhibits showing that the proposed construction is in the public interest and whether it is economically feasible.
CVGS notes the Commission has previously waived the cost data requirement in Rule 3.1(f) for independent storage providers that charge market-based rates and lack market power.14 There is no opposition to CVGS's request.
We grant the requested waiver of Rule 3.1(f). The chief purpose of Rule 3.1(f) is to provide the Commission with data needed to set cost-based rates for utilities. CVGS will not have cost-based rates. As described in more detail below, CVGS will have market-based rates. Thus, there is no need for CVGS to provide the cost data required by Rule 3.1(f) for ratemaking purposes.
6.3. Market-Based Rates
CVGS requests authority to charge market-based rates for storage services. There is no opposition to CVGS's request.
CVGS's request is consistent with Commission precedent.15 For example, in D.00-05-048 the Commission authorized Lodi to charge market-based rates because Lodi lacked market power. The determination that Lodi lacked market power was based on three facts: (1) Lodi was a newcomer to the California gas storage market; (2) Lodi was starting with a customer base of zero; and (3) Lodi was not in a position to force other utilities to exit the market.16
The same circumstances are present here. First, CVGS is a new entrant into a market that has several established providers of gas storage services. The additional storage capacity provided by the CVGS Project will make the market even more competitive. Second, CVGS will start with a customer base of zero. Finally, as a new entrant, CVGS will not be able to force other gas storage providers to exit the market because CVGS will be adding a relatively small amount of incremental capacity to a market with well-established competitors.
We conclude for the previous reasons that it is reasonable to grant CVGS's request to charge market-based rates for its services. Consistent with our prior decisions, we will require CVGS to establish a rate zone for each service that includes pre-set minimum and maximum rates.17 CVGS may revise its rate zones in response to changing market conditions.
6.4. Tariff
CVGS requests approval of its proposed tariff appended to A.09-08-008 as Exhibit E. There is no opposition to the proposed tariff. We find the proposed tariff is reasonable and approve it. CVGS must file its initial tariff using the Tier 1 advice letter process at least 30 days prior to offering services to the public. The initial tariff must be substantially similar to the draft tariff appended to A.09-08-008. CVGS does not need to provide cost justification with the tariff it files pursuant to today's decision or with future revisions to its tariff.
6.5. Waiver of § 818, § 851, and the Competitive Bidding Rule
CVGS requests that its issuance of debt and equity be exempt from § 818, § 851, and from the Commission's Competitive Bidding Rule.18 CVGS states that the requested exemption is reasonable given that it will assume all financial risks. There is no opposition to CVGS's request.
The Commission routinely grants exemptions from § 818, § 851, and the Competitive Bidding Rule for debt and equity issued by utilities that (1) possess no market power, and (2) bear all risks for their business activities.19 CVGS possesses both of these characteristics. Therefore, consistent with Commission precedent, we grant CVGS's request for an exemption from § 818, § 851, and the Competitive Bidding Rule for the limited purpose of issuing debt and equity to finance utility-related investments and operations.
6.6. Public Safety, Insurance, and Indemnification
Enerland opposes CVGS's request for a CPCN because CVGS has allegedly failed to show that it "evaluated and provided for all risks to the public safety that its project may present."20 Although CVGS proposes to obtain general liability insurance of $35 million, Enerland asserts the amount is inadequate and protects only CVGS. Enerland recommends that CVGS be required to obtain an adequate amount of insurance and to indemnify parties against potential liability.
We disagree with the premise that the CVGS Project is unsafe. The Project will be designed to meet the requirements of (1) the U.S. Department of Transportation's Office of Pipeline Safety, which oversees pipeline and natural gas facility construction, operation, and safety; (2) the California Department of Conservation Division of Oil, Gas and Geothermal Resources, which oversees the design, installation, and operation of gas wells and underground gas injection projects; and (3) the California Building Code seismic safety standards.
Enerland did not provide an analysis of the safety risks of the CVGS Project other than a few newspaper articles of accidents involving natural gas. Conversely, CVGS's application contained extensive information documenting how the CVGS Project would be constructed and operated in a manner that meets all safety requirements.21 The MND that is adopted by today's decision contains a thorough analysis of the safety hazards posed by the Project 22 The adopted MND finds that with the implementation of required safety measures, the CVGS Project can be constructed and operated safely.
It is significant that PG&E will be responsible for the construction, operation, and maintenance of the interconnection of the CVGS Project with PG&E's Line 400/401 at a location that is somewhat near PG&E's Colusa Power Plant.23 As a large natural gas utility, PG&E has extensive expertise and experience with interconnections. PG&E has been an active party in this proceeding but has not expressed any concerns about the potential risks of the CVGS Project. This undermines Enerland's claim that the Project could cause "catastrophic harm to PG&E's Colusa Power Plant."24
In its comments on the proposed decision, Enerland claims the MND fails to properly evaluate what Enerland describes as the "extraordinary risk" of interconnecting the CVGS Project with PG&E's gas transmission system in the vicinity of PG&E's Colusa Power Plant.25 This assertion lacks merit. The MND contains a thorough analysis of the risks that the CVGS Project poses to PG&E's Colusa Power Plant and the public at large, and finds that the likelihood of a dangerous release of natural gas from the CVGS Project from a ruptured pipeline or other causes is extremely low and less than accepted significance criteria.26
In the event there were a large-scale release of natural gas from the CVGS Project that resulted in a fire or explosion, it is very unlikely that PG&E's Colusa Power Plant would suffer any significant damage. This is because the MND finds that potentially harmful torch fire impacts to property would extend up to 720 feet from the point of rupture, and potentially harmful flash fire impacts to property (i.e., harmful impacts from the explosive ignition of a natural gas vapor cloud) would extend up to 443 feet.27 The CVGS Project will interconnect with PG&E gas-transmission system at a location that places PG&E's Colusa Power Plant beyond the damaging reach of torch fires and explosions.28
With respect to the risks to individuals, the MND finds that the aggregate risk of death from the accidental release of natural gas is 1-in-250,000,29 which is less than generally accepted significance criteria.30
Enerland asserts in its comments on the Proposed Decision that the MND's analysis of safety risks is deficient because the MND did not consider the following catastrophic accidents involving natural gas: the destruction of the Kleen Energy Power Plant in February 2010; an explosion in June 2009 at a ConAgra Foods plant in North Carolina that killed four workers; an explosion in August 2009 at an El Paso Natural Gas pipeline that caused 12 deaths; the Deepwater Horizon oil rig catastrophe in April 2010 that killed 11 people; and the recent explosion of a PG&E natural gas pipeline in San Bruno, California, that killed eight people.
We disagree that the MND's risk analysis is inadequate. The risk analysis is based, in part, on the United States Department of Transportation's (USDOT) extensive database of gas pipeline accidents. The MND used the USDOT's database to develop the anticipated frequency and consequences of unintentional releases of natural gas from the CVGS Project. We concur with the following explanation contained in the MND regarding why it is appropriate to exclude the accidents cited by Enerland from the MND's risk analysis:31
Kleen Energy Systems Power Plant, February 2010 - This incident occurred during the construction of a combined cycle gas- and oil-fired power plant, which is a different type of project than the CVGS gas storage project. Since the USDOT does not regulate power plants, this incident is not included in the USDOT gas transmission pipeline database. However, construction accidents have occurred on natural gas transmission pipelines that are more comparable to the CVGS Project. These incidents are included in the USDOT database that was used to prepare the MND. As a result, incidents similar to the Kleen Energy Systems Power Plant incident were considered in the MND, to the extent that they relate to natural gas transmission and compression facilities.
ConAgra Foods Plant, North Carolina, June 2009 - This incident occurred at a food-processing plant. It was likely caused by an accidental venting and subsequent ignition of natural gas inside the building during the installation of a water heater. Since the USDOT does not regulate food-processing facilities, this incident is not included in the USDOT gas transmission pipeline database and, therefore, was not considered in the MND. Additionally, a food-processing facility is not the same type of facility as a gas storage project. The only common factor is natural gas. To help prevent these types of incidents at natural gas transmission, compression, and storage facilities, there are a number of applicable laws, ordinances, regulations, and standards (LORS). These LORS prohibit ignition devices within specified distances from possible natural gas sources (e.g., flanges, compressors, and valves) and require numerous safeguards that were not applicable to the ConAgra Foods Plant. Many of these LORS are outlined in the MND, Appendix D, Section 2.0. For example, a compressor building must be equipped with gas-detection and alarm equipment; an emergency shutdown system must be installed; vent and pressure relief lines must be routed to a location where the gas can be discharged without hazard; and ventilation must be provided to ensure that employees are not endangered by the accumulation of gas in rooms or other areas.
El Paso Natural Gas, Carlsbad, New Mexico, August 2000 - This incident resulted in 12 fatalities and is included in the USDOT gas transmission pipeline database. However, it occurred before the period evaluated in the MND risk assessment (January 2002 through December 2008). The period prior to January 2002 was not analyzed in the risk assessment because these records do not include reporting fields for fires or explosions. As a result, they could not be used to determine the conditional probabilities of ignition. During the 7-year period considered in the MND, the USDOT database included seven incidents that resulted in fatalities. Further, the MND included modeling of a full bore pipeline rupture and subsequent ignition, similar to the El Paso incident. As a result, the likelihood and consequences of a full bore pipeline rupture are presented in the MND.
Deepwater Horizon, Gulf of Mexico, April 2010 - This incident occurred during the drilling of a deep-water exploration well in the Gulf of Mexico. The CVGS project does not include any deep-water drilling. Also, this incident occurred after the MND was prepared. As a result, this incident was not included in the MND.
The explosion of PG&E's gas pipeline in San Bruno on September 9, 2010, also occurred too late to be addressed by the MND. There are several investigations currently underway regarding the San Bruno incident. Until the investigations are complete, we decline to speculate on what lessons should be drawn from the San Bruno incident with respect to the CVGS Project.
We take very seriously the risks associated with natural gas storage and transport. Such accidents can kill and injure without warning and devastate communities. At the same time, we recognize that it is impossible to eliminate all of the safety risks associated with natural gas infrastructure projects. If that were the standard, there would be no natural gas infrastructure in California. Here, we find the safety risks associated with the CVGS Project have been identified and reduced to a level of less than significant. The residual risks to public safety are very low and, on balance, reasonable in light of the public benefits of the project.
For the preceding reasons, we decline to adopt Enerland's recommendation to deny a CPCN for the CVGS Project on the basis of safety concerns. However, we agree with Enerland that CVGS should be required to maintain an adequate amount of liability insurance. We further agree that $35 million is insufficient. Consistent with previous decisions, we will require CVGS to maintain $50 million of general liability insurance per occurrence and in aggregate.32 We believe this amount is adequate given the Project's rural location, the remote risk of large-scale catastrophic damage to property, and the extremely low risk of death and injury to people. The required insurance shall increase every five (5) calendar years by an amount equal to inflation during the previous five years, rounded to the nearest million. The first five-year period shall start on January 1, 2011. The measurement of inflation shall be the gross domestic product deflator. Regardless of its insurance, CVGS must indemnify Enerland and other parties for any costs and losses they incur due to accidents associated with the construction or operation of the CVGS Project where CVGS is found to be liable.
CVGS may obtain the required insurance directly or through Nicor. If the former, the deductible or self insured retention must not exceed $250,000. If the latter, the insurance policy must always provide $50 million of coverage to CVGS, escalated by inflation as described previously, regardless of any claims paid to other affiliates under the policy.
In its comments on the proposed decision, Enerland argues that the Proposed Decision's insurance and indemnity requirements are inadequate, given Enerland's position that the CVGS Project is unsafe. We disagree; the required amount of insurance is sufficient for all plausible scenarios. As discussed above, the MND determined that there is a very low risk that the CVGS Project will harm people or cause significant damage to property. The insurance coverage we require for the Project is similar to what we have required for similarly situated gas storage projects, and the indemnification requirement goes beyond what we have previously required for such projects.33
6.7. SoCalGas's Proposed Reporting Requirements
SoCalGas recommends that the Commission require CVGS to comply with the same information-posting requirements that apply to SoCalGas. The recommendation is opposed by CVGS, Gill Ranch, Lodi, and Wild Goose. No party expressed support for SoCalGas's recommendation.
We decline to adopt SoCalGas's recommendation for the following reasons. First, as explained in CVGS's Brief,34 SoCalGas voluntarily agreed to the information-posting requirements in settlement agreements that it executed with numerous parties. Many of the provisions of these settlement agreements, including the information-posting requirements, were adopted by the Commission in D.07-12-019.
In general, the Commission does not treat settlement agreements as precedents unless the Commission indicates otherwise. There is no indication in D.07-12-019 that the Commission intended to treat the information-posting requirements adopted therein as a precedent for other gas-storage providers. Therefore, the fact that SoCalGas agreed to implement information-posting requirements has no bearing on whether the same requirements should apply to CVGS.
Second, CVGS and SoCalGas are not similarly situated. SoCalGas is the largest storage provider in the California with over 130 Bcf of capacity, which is approximately 44% of the entire storage capacity in California and more than ten times the planned capacity of CVGS. And unlike CVGS, SoCalGas controls the gas transportation system connected to its storage fields, has captive ratepayers, is not fully at-risk for its investment in storage facilities, and has extensive affiliate connections in California. In light of these materially different circumstances, we are not convinced that it is necessary or desirable for CVGS to comply with the same information-posting requirements that apply to SoCalGas.
Finally, adopting SoCalGas's recommendation would result in information-posting requirements that apply to SoCalGas and CVGS, but not to the other gas-storage providers in California (i.e., PG&E, Gill Ranch, Lodi, Wild Goose, and Sacramento Natural Gas Storage, LLC.) We conclude that it is inappropriate to require CVGS, but not other gas-storage providers, to comply with the same information-posting requirements that apply to SoCalGas.
6.8. The Settlement Agreement
On March 24, 2010, CVGS, DRA, Lodi, and PG&E (collectively, the Settling Parties) filed a Settlement Agreement and a motion to adopt the Settlement Agreement pursuant to Rule 12.1. A copy of the Settlement Agreement is contained in Attachment A of today's decision.
The Settlement Agreement resolves all issues raised by DRA, Lodi, and PG&E, and contains three conditions which the Settling Parties seek to include, without modification, in the Ordering Paragraphs of today's decision. The three conditions are summarized below.
Condition 1: To resolve issues raised by PG&E, CVGS agrees to the following:
a. All costs of the CVGS Project shall fall entirely on CVGS and its storage customers, not on PG&E and its ratepayers. Such costs include the construction of all facilities for the Line 400/401 and Line 172 interconnections, and all necessary changes to PG&E's computer and allocation modeling systems.
b. CVGS will be an independent storage provider (ISP) under the Commission's regulations, and will be subject to the ISP Interconnections Agreement described in D.06-09-039 as well as other Commission decisions setting policy for ISPs.
c. CVGS must deliver gas into PG&E's transmission pipeline system in conformance with the specifications in PG&E's Commission-approved gas quality tariff, Gas Rule 21.C., ¶ 4.
d. CVGS acknowledges that (i) the temporary interconnection to PG&E's Line 172 will be disconnected when the Line 400/401 interconnection and compressor facilities are completed; (ii) CVGS will bear all costs for disconnecting from Line 172; (iii) the Line 172 interconnection is not bi-directional, and that CVGS cannot deliver gas back into Line 172; and (iv) CVGS must operate its facility within the available parameters and capacity of Line 172 as determined by PG&E to ensure that PG&E's end-use customers served by Line 172 receive reliable gas service.
Condition 2: To resolve issues raised by Lodi, CVGS agrees to the following:
a. CVGS shall submit a semi-annual report to the Director of the Commission's Energy Division, with a copy to DRA, that contains the following information about transactions which are not already subject to § 852 and § 854:
i. The identity of any affiliate that directly or indirectly has acquired or has made an investment resulting in a controlling interest or effective control, whether direct or indirect, in an entity in California or elsewhere in Western North America that (A) produces natural gas or provides natural gas storage, transportation or distribution services; or (B) generates electricity, or provides electric transmission or distribution services. Information reported pursuant to (A) and (B) shall include the nature, name, and location of the asset acquired or the investment made, and the amount of the acquisition or investment.
ii. For the purposes of Condition 2(i) above, the following definitions apply: "affiliate" means any direct or indirect parent entity of CVGS, any entity controlled by CVGS whether directly or indirectly, any entity under common control with CVGS by a direct or indirect parent entity (e.g. any subsidiary of any CVGS parent entity); and "Western North America" is defined to mean, in addition to California, the states of Oregon, Washington, Arizona, New Mexico, Texas, Nevada, Colorado, Wyoming and Utah, as well as the provinces of British Columbia and Alberta in Canada and the State of Baja California Norte in Mexico. Competitively sensitive, confidential information may be submitted under seal in accordance with GO 66-C and § 583.
b. CVGS shall provide to the Director of the Commission's Energy Division, for transactions to be completed within one year or less (short-term transactions), true copies of all service agreements for such transactions within 30 days after commencement of the short-term service, to be followed by quarterly transaction summaries of specific sales. If CVGS enters into multiple service agreements within a 30-day period, CVGS may file these service agreements together so as to conserve the resources of both CVGS and the Commission. The quarterly summary of transactions shall list, for all tariffed services, the purchaser, the transaction period, the type of service (e.g. firm, interruptible, balancing, etc.), the rate, the applicable volume, whether there is an affiliate relationship between CVGS and the customer, and the total charge to the customer. Competitively sensitive, confidential information, including the short-term service agreements, may be submitted under seal in accordance with GO 66-C and § 583.
c. CVGS shall provide to the Director of the Commission's Energy Division, for transactions that will not be completed within one-year (long-term transactions), true copies of all service agreements for such transactions within 30 days after commencement of the long-term service. To ensure the clear identification of filings, and in order to facilitate the orderly maintenance of the Commission's records, service agreements for long-term transactions shall not be filed with summaries of short-term transactions. Competitively sensitive, confidential information, including the long-term service agreements described herein, may be submitted under seal in accordance with GO 66-C and § 583.
Condition 3: To resolve issues raised by DRA, CVGS agrees to provide an annual report to the DRA that contains the following information:
a. The capacity of the CVGS Project storage facilities, i.e., total inventory, and injection and withdrawal rights.
b. A summary showing average monthly storage inventory, injections, and withdrawals for the CVGS Project. The summary shall be based on the Energy Information Reports that CVGS submits to the U.S. Department of Energy.
c. Daily operating records, aggregated on a weekly basis, based on the Energy Information Reports submitted to the U.S. Department of Energy.
d. A copy of the annual safety report, including a description of all safety-related incidents that is submitted to the U.S. Department of Transportation.
e. The aggregate firm storage capacity under contract (with monthly and annual data) and aggregate interruptible storage capacity sold (with monthly and annual data).
f. Competitively sensitive, confidential information shall be identified by CVGS and treated by DRA as confidential pursuant to GO 66-C and § 583.
The reporting requirements in the Settlement Agreement replace the reporting requirements proposed by CVGS in A.09-08-008 at pages 42-43.
The Settling Agreement provides that upon the issuance of a Commission decision adopting the three conditions, the conditions may only be modified, revised, or eliminated by the Commission in a decision issued in response to a formal petition to the Commission by one of the Settling Parties.
Responses to the Settlement Agreement were filed by Enerland and SoCalGas. They both note that the Settlement Agreement does not address any issues they raised. We addressed these issues previously in today's decision.
Enerland does not oppose the Settlement Agreement. SoCalGas opposes the Settlement Agreement to the extent it would allow CVGS to submit reports under seal. SoCalGas asserts that the reports should be made public.
The Settlement Agreement is subject to Rule 12.1(d), which states:
The Commission will not approve settlements, whether contested or uncontested, unless the settlement is reasonable in light of the whole record, consistent with law, and in the public interest.
As set forth below, we find that the Settlement Agreement is reasonable in light of the record of this proceeding, is consistent with the law, and in the public interest. We therefore approve the Settlement Agreement.
The Settlement Agreement adopts the positions advocated by PG&E, Lodi, and DRA. By doing so, the Settlement Agreement will help ensure that CVGS will bear all costs to interconnect with PG&E's Line 400/401 and Line 172; will operate in a manner that does not adversely affect PG&E's system or end-use customers; and will provide the Commission with information needed to monitor CVGS's market activities in California and CVGS's affiliate transactions and relationships. These outcomes are not only reasonable in light of the record, they are reasonable per se.
With one clarification, the Settlement Agreement is consistent with the Public Utilities Code, prior Commission decisions, and other applicable law. The one clarification concerns the provision in the Settlement Agreement that it "may only be modified, revised, or eliminated by the Commission in a Decision issued in response to a formal petition to the Commission."35
We interpret this provision as applying to the Settling Parties and not the Commission. The Commission's authority to revise the Settlement Agreement, once adopted, is set forth in § 1708, which states as follows:
The commission may at any time, upon notice to the parties, and with opportunity to be heard as provided in the case of complaints, rescind, alter, or amend any order or decision made by it. Any order rescinding, altering, or amending a prior order or decision shall, when served upon the parties, have the same effect as an original order or decision.
Pursuant to § 1708, our power to modify, revise, or eliminate the Settlement Agreement is not limited to situations where one of the Settling Parties has filed a formal petition. Under § 1708, we may rescind, alter, or amend the Settlement Agreement adopted by today's decision after providing notice to the parties. We will adopt the Settlement Agreement with this understanding.
We find the Settlement Agreement is in the public interest because (1) it allows new gas storage facilities to be approved and built in a timely manner, consistent with the EAP II and EAP Update; (2) it provides Commission Staff with information on a regular basis about the CVGS Project that is pertinent to the Commission's regulatory responsibilities; (3) CVGS's shareholders will bear all the risks for the CVGS Project; and (4) the Project will not adversely affect PG&E or PG&E's end use costumers.
SoCalGas opposes the provision in the Settlement Agreement that allows CVGS to submit competitively sensitive, confidential information to Commission Staff under seal. SoCalGas argues that without a clear showing on the need for confidentiality, the information should be made public.
We agree with SoCalGas that information submitted to Commission Staff should be available to the public unless there is a persuasive showing on the need for confidentiality. However, unlike SoCalGas, we interpret the Settlement Agreement as complying with this principle. Specifically, the Settlement Agreement does not state that all information will be submitted under seal. Rather, it states that only competitively sensitive, confidential information may by submitted under seal in accordance with GO 66-C and § 583.
GO 66-C and § 583 provide a framework for utilities to submit information to Commission staff under seal and for parties to request public disclosure of such information.36 If CVGS submits information under seal pursuant to § 583, and a party requests public disclosure of that information pursuant to GO 66-C,
CVGS will have the burden at that time to demonstrate why the information should be afforded confidential treatment.
CVGS filed concurrently with the Settlement Agreement a motion to waive Rule 12.1(b), which requires the parties to a settlement agreement to hold at least one settlement conference before submitting a settlement for Commission approval. CVGS states that it is unnecessary to hold a settlement conference because it provided a draft copy of the Settlement Agreement to the service list on March 17, 2009. On March 18, 2009, CVGS held an all-party conference call in which CVGS stated its intent to file the Settlement Agreement on March 24, 2010. CVGS reports that no party expressed objections to the Settlement Agreement at that time. There is no opposition to CVGS's motion to waive Rule 12.1(b).
Given that the motion is unopposed, we see no point in requiring the Settling Parties to hold a settlement conference pursuant to Rule 12.1(b). Therefore, we grant CVGS's motion to waive Rule 12.1(b).
7 D.93-02-013, &_butType=3&_butStat=2&_butNum=9&_butInline=1&_butinfo=&_fmtstr=FULL&docnum=3&_startdoc=1&wchp=dGLzVzz-zSkAb&_md5=3ad0c2cd3cc1f728f724c417347e6656" target="_top">48 CPUC 2d 10, at 118-119 and 140, Finding of Fact 37. See also D.02-07-036 at 8-9.
8 EAP Update at 17.
9 A.09-08-008 at 27.
10 A.09-08-008 at 8.
11 See, GO 112-E, Section 125.1. Also, Section 162.3 requires any operator that is planning to build an LNG facility in California to notify the USRB 90 days prior to commencing construction of that LNG facility.
12 Section 1005.5(d) states: "In any decision establishing rates for...[a] gas corporation reflecting the reasonable and prudent costs of the new construction...of the corporation's plant...the commission shall consider whether or not the actual costs of construction are within the maximum cost specified by the commission."
13 D.09-10-035 at 55, 70 (Conclusion of Law [COL] 21), and 72 (OP 6); D.03-04-038 at 12-13; D.02-07-036 at 55 (COL 9); and D.00-05-048 at 75 (COL 16).
14 D.00-05-048 at 39 (citing D.98-06-083 at 3-6).
15 D.97-06-091 as modified by D.98-06-083; D.02-07-036; D.00-05-048; D.06-03-012; D.08-02-035; and D.09-10-035.
16 D.00-05-048 at 38-39.
17 D.09-10-035 at 54. CVGS's proposed tariff appended to A.09-08-008 includes a rate zone for each service.
18 The Competitive Bidding Rule is in Resolution F-616, dated October 1, 1986.
19 See, for example, D.10-04-007, D.10-02-021, and D.09-10-035.
20 Enerland Opening Brief at 4.
21 A.09-08-008, Proponent's Environmental Assessment, Section 3.7.
22 MND, Section 5.8 and Appendix D.
23 CVGS Opening Brief at 8.
24 Enerland Opening Brief at 6.
25 Enerland Comments at 8.
26 MND, Appendix D, System Safety and Risk of Upset, Section 6.
27 MND, Appendix D, System Safety and Risk of Upset, Section 6.
28 MND, Section 4, Figure 2 and Appendix A, Sheet 11. See also CVGS's Reply Comments on the Proposed Decision at 2 and Exhibit A.
29 MND, Appendix D at D-65. The aggregate risk of death is the sum of the frequency of anticipated fatalities from each possible risk, for each of the project components, over the entire project length, over a given period of time. (MND, Appendix D at D-61.)
30 MND, Appendix D, Sections 7.2 and 7.3.
31 MND, Attachment 1, Response to Comments, Item E2-4 at E2-10 and 11.
32 The Commission adopted a $50 million insurance requirement in D.09-10-035 at 47 - 48, and in D.00-05-048 at 79, OP 5.
33 See D.00-05-048 re: Lodi Gas Storage; D.09-10-035 re: Gill Ranch Storage.
34 CVGS Opening Brief at 11-12.
35 Settlement Agreement, Section III.C.
36 D.07-05-032 and D.06-06-066 provide a useful summary of GO 66-C and § 583.
