5. Discussion
The Commission has previously expressed its intent to exercise its regulatory authority to review and approve proposals for a change in control of California's independent gas storage providers and stated:
We think it prudent public policy to review and approve changes in the ownership and control of certificated natural gas storage utilities, whether those changes occur directly, or indirectly through corporate intermediaries. Such review should help to ensure the continued economic viability of such utilities and to prevent market manipulations that may affect not only their own customers but also larger ratepayer groups. D.05-12-005 mimeo., at 7, 2005 Cal PUC LEXIS 527 quoting D.03-02-071, mimeo. at 11-12, 2003 CalPUC
LEXIS 133.
In this instance, Central Valley's proposed change in ownership is due to the proposed merger of Nicor and AGLR. This proposed merger will have no impact on Central Valley's operations, and Central Valley will continue to hold the CPCN for its storage facility issued in D.10-10-001. Joint Applicants state that the transfer will not result in any change to the proposed services to be provided by Central Valley, or to the rates or terms and conditions under which they will be provided. Once in service, Central Valley will provide unbundled storage services to the public, as approved by D.10-10-001 and be bound by the terms and conditions of its CPCN.4 Joint Applicants do not seek the transfer of Central Valley's CPCN, rather, Central Valley will continue to hold it and will offer natural gas storage at market-based rates, pursuant to D.10-10-001.
The proposed indirect change of control will also not affect Central Valley, its customers nor the market place. Joint Applicants state:
Notwithstanding the indirect change in ownership, Central Valley will continue to operate as an independent natural gas storage provider subject to the jurisdiction of the Commission. In addition, the transaction will not result in the transfer of any certificates, assets or customers of Central Valley.5
Joint Applicants state that AGLR's affiliate, Sequent Energy Management, L.P. (Sequent) currently has contracts for short-term interruptible storage with PG&E within California and holds a limited amount of firm transportation capacity on Gas Transmission Northwest Corporation and El Paso Natural Gas Company. However, neither AGLR nor its subsidiaries or affiliates own gas storage facilities and pipeline assets in California or the West Coast.6 Therefore, the proposed transaction will have no significant impact on competition or the marketplace.
Joint Applicants state that the proposed transfer of ownership will affect one aspect of D.10-10-001. In that decision, Central Valley could obtain the required $50 million in general liability insurance either directly or through Nicor. Since Nicor will cease to exist after the proposed transaction, AGLR will now bear this responsibility. AGLR has affirmed that it will step in to Nicor's shoes to provide the insurance on Central Valley's behalf, rather than Central Valley obtaining it on its own.7 Joint Applicants state that the change in responsible party from Nicor to AGLR, as part as the transfer of ownership, will not affect the type nor amount of insurance required in D.10-10-001. However, they believe some affirmative authorization is required before such a change may occur. We agree with Joint Applicants that AGLR should be authorized to obtain insurance on Central Valley's behalf. Consequently, upon completion of the proposed transaction, AGLR shall replace Nicor as the responsible party and shall be authorized to obtain insurance on behalf of Central Valley.
Central Valley will benefit from the proposed transaction. AGLR currently operates gas storage facilities in Texas and Louisiana, and thus has extensive natural gas storage experience. This experience will assist Central Valley in its provision of storage services to California customers. Additionally, the combination of Nicor and AGLR's financial resources will provide Central Valley with greater access to funds for investments. Further, Nicor and AGLR are two of the largest natural gas distribution companies in the United States. Thus, consolidation of these two entities will allow for cost efficiencies in the provision of all services.
4 Central Valley has stipulated that it will abide by all the obligations, terms and conditions imposed by D.10-10-001, as well as the terms and conditions of the settlement agreement. (Reporter's Transcript (RT), Vol. PHC-1 at 16:21 - 17:4.)
5 Application at 2.
6 Application at 10.
7 RT PHC-1 at 10:9-18.
