V. Commission Jurisdiction Over the Project

SES filed an application before the FERC on January 26, 2004 seeking authority to import natural gas through its proposed LNG facility. As part of its application, it states that SES has "complied in all material respects with the applicable laws and regulations of the State of California."³ In its Notice of Intervention at FERC, this Commission objected to this statement and briefly explained its jurisdictional authority.

SES filed its application at FERC under Section 3 of the Natural Gas Act (15 USC Section 7171b), which refers only to authorizing "exportation" or "importation" of natural gas or LNG. Nothing in this section or other portions of the Natural Gas Act anticipate the FERC's regulation of the siting, construction or operation of facilities that do not conduct interstate operations (Border Pipe Line Co. v. FPC, 171 F.2d 149, 151 (DC Cir. 1948)). Because SES does not propose to conduct interstate transport, it is not subject to FERC's jurisdiction.

Conversely, this Commission does have jurisdiction to regulate the siting, construction and operation of natural gas and pipeline facilities, including LNG and gas storage in California. SES proposes to use the proposed LNG facilitate to sell natural gas into California's natural gas markets. This activity would make SES a public utility pursuant to California Public Utilities Code Sections 216, 221, 222, 227, and 228. As a public utility, SES must apply for and receive a certificate of public convenience and necessity from this Commission prior to commencement of construction of its proposed facility, pursuant to Public Utilities Code Section 1001. This jurisdiction does not extend to pricing or the importation of LNG supplies, consistent with federal law (15 USC Section 717b(b) and (c)). This Commission does, however, retain jurisdiction over plant siting, facility safety, emergency gas supplies for residential customers and electric generation units, market power, and ownership transfers or merger.

The Commission has informed SES of the Commission's interest in the matter and jurisdiction over the project in a letter dated October 30, 2003. The letter advised SES that it would have to apply for and receive a CPCN from the Commission in order to construct and operate its facility legally.

To date, SES has not applied for any authority from this Commission. Indeed, in a lengthy pleading filed at FERC on March 9, 2004, SES explicitly challenged this Commission's authority over the project (Answer to CPUC's Notice of Intervention in FERC Docket No. CP04-58-000.)

SES' jurisdictional claims before the FERC are antithetical to state and federal law and the interests of California consumers, communities, businesses and economy. The legal disputes before the FERC in SES' application may extend out to an indefinite future. In order to avoid delay of our review of this project, we will not wait for a final resolution of those jurisdictional questions. We choose instead to conduct a concurrent review of relevant issues by opening this investigation.