E. Discussion

We begin our discussion with the appropriate standard of review under Pub. Util. Code § 854. As noted above, some of our decisions have held that where there is a change in the form of ownership but no change in actual control of a public utility, review of the transfer under § 854 is not appropriate. However, in view of our decisions favoring Commission review of a transfer of a 50% interest in a utility, and the fact that we chose to review the transfer of the other 50% interest in LGS in D.03-02-071, we think it is appropriate for us to exercise our § 854 jurisdiction in this case. As we stated in D.03-02-071:

"Generally, we think it is prudent public policy to review and approve changes in the ownership and control of certificated natural gas storage facilities, 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." (Mimeo. at 12-14.)

The "market manipulations" to which D.03-02-071 referred are those made possible by the highly-concentrated nature of the natural gas storage market. As D.03-02-071 noted, we had previously found evidence in D.02-07-036⁷ "of a highly concentrated market for storage injection and withdrawl in both the northern California and statewide California markets." (Mimeo. at 16.) Although these concerns were reduced in LGS's case because of the passive nature of the investment by WHP Acquisition and ArcLight Fund I, we nonetheless imposed the following restrictions on the transfer:

"So that we may better monitor the evolving natural gas market, and as a condition of our approval of the change of ownership (with continued market-based rate authority), we will impose the same reporting requirements on LGS that we have imposed on Wild Goose. Specifically, with the exception of the agreement by which Western Hub will serve as Company Manager for Lodi Holdings, we will prohibit LGS from engaging in any storage or hub services transactions with its ultimate parents, Western Hub and ArcLight (or their successors) or any other affiliate owned or controlled by either of those entities. In addition, we will direct LGS to promptly inform the Commission of the following changes in status that would reflect a departure from the characteristics the Commission has relied upon in approving market-based pricing: LGS' own purchase of other natural gas facilities, transmission facilities, or substitutes for natural gas, like liquefied natural gas facilities; an increase in the storage capacity or in the interstate or intrastate transmission capacity held by affiliates of its parents or their successors; or, merger or other acquisition involving affiliates of its parents, or their successors, and another entity that owns gas storage or transmission facilities or facilities that use natural gas as an input, such as electric generation." (Id. at 17-18.)

Nothing in the application here suggests that the gas storage injection and withdrawl markets are any less concentrated today than they were when D.03-02-071 was decided. Accordingly, we will incorporate the restrictions quoted above as a condition of our approval of the transfer proposed here. We will also incorporate the requirements in Ordering Paragraphs (OPs) 3(d) and 3(e) of D.03-02-071 that LGS file its service agreements for both short-term and long-term transactions with the Director of the Commission's Energy Division.

⁷ In D.02-07-036, we granted a CPCN to Wild Goose Storage, Inc. (Wild Goose) for a natural gas storage facility. The CPCN was subject to a number of conditions.