STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

July 25, 2002

TO: ALL PARTIES OF RECORD IN APPLICATION 01-06-029

Decision 02-07-036 is being mailed without the Joint Dissent of President Lynch and Commissioner Wood. The Dissent will be mailed separately.

Very truly yours,

/s/ CARL K. OSHIRO

Carl K. Oshiro, Interim Chief

Administrative Law Judge

CKO:acb

Attachment

COM/MP1/JF2/acb Mailed 7/25/02

Decision 02-07-036 July 17, 2002

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Wild Goose Storage, Inc. to Amend its Certificate of Public Convenience and Necessity to Expand and Construct Facilities for Gas Storage Operation.

Application 01-06-029 (Filed June 18, 2001)

(See Attachment A for List of Appearances.)

TABLE OF CONTENTS

Title Page

OPINION ON APPLICATION OF WILD GOOSE STORAGE INC. TO AMEND ITS CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY AND TO EXPAND ITS GAS STORAGE FACILITES 2

1. Summary 2

2. Background 3

2.1 Wild Goose and the Existing Facility 3

2.2 Overview of the Proposed Project 4

2.3 Procedural Background 5

3. Requirements for Certification Under §§ 1001 et seq. 6

3.1 Need 7

3.2 § 1002 Issues 9

4. Authority to Charge Market Based Rates for Expansion Project Service 11

5. Wild Goose's Status as a Public Utility for Purposes of Eminent Domain 19

6. Interconnection Issues 21

6.1 Scope of the Required Interconnection Facilities 21

6.2 Allocation of Costs for Interconnection Facilities 22

6.3 Operating and Balancing Agreement 26

7. Backbone Transmission Service Issues 26

7.1 What Level of Transmission Service Will Be Available on the PG&E Backbone Upon Interconnection of the Wild Goose Expansion? 26

7.2 Transportation Service for Gas Storage Withdrawals 29

7.3 Brief Overview: Backbone Expansion and Alternatives 34

8. Review Under CEQA 35

8.1 EIR Preparation Process and Public Review 36

8.2 The Proposed Project and Project Alternatives 38

8.3 Environmental Impacts and Mitigation Measures 40

8.4 Certification of the EIR 42

9. Conclusion 42

10. Comments On Alternate Proposed Decision 44

11. Motion to Set Aside Submission 44

Findings of Fact 46

Conclusions of Law 51

ORDER 54

ATTACHMENT A - List of Appearances

ATTACHMENT B - Mitigation, Monitoring and Reporting Program

ATTACHMENT C - Errata for WGSI Expansion Project FEIR MMRP

OPINION ON APPLICATION OF WILD GOOSE STORAGE INC.
TO AMEND ITS CERTIFICATE OF PUBLIC CONVENIENCE AND
NECESSITY AND TO EXPAND ITS GAS STORAGE FACILITES

1. Summary

Applicant Wild Goose Storage Inc. (Wild Goose) seeks an amendment of its certificate of public convenience and necessity (CPCN) to expand its gas storage facilities in Butte County by 15 billion cubic feet (Bcf) and to connect the expanded facility to the major transmission pipeline owned by Pacific Gas and Electric Company (PG&E), Line 400/401, near the Delevan Compressor Station in Colusa County. Wild Goose asks that we authorize it to offer this additional storage capacity and related services at market-based rates. We authorize the expansion project and market-rate authority for it, but prohibit Wild Goose from engaging in any storage or hub services transactions with its parent company or any affiliate controlled by its parent company.¹ We also require Wild Goose to comply with other reporting requirements as detailed herein, so that we may monitor developments in the evolving marketplace. In addition, we commit the Commission to undertaking a thorough review of and potential revisions to its 1997 Affiliates Transactions Rules, as they apply to independent storage companies, in R.01-01-001, a proceeding to which Wild Goose is already a respondent.

The decision also certifies the Environmental Impact Report (EIR) for the Wild Goose expansion project and further conditions the CPCN on mitigations set forth in the EIR. Because one significant environmental effect of the project, the permanent loss of a minimum of 5.8 acres of prime farmland to non-agricultural use, cannot be avoided or mitigated, we issue a statement of overriding consideration, in light of the significant local support for the expansion project and the benefits to the state of additional gas storage.

We decline to open a Phase III of this proceeding, or another proceeding, to further examine the need for expansion of PG&E's "backbone" transmission capacity or the cost allocation of such an expansion. The record establishes that adequate transportation capacity exists to serve demands for storage injection. Whether or not the backbone will be able to serve all demands for storage withdrawal at peak demand periods is uncertain, but the record indicates that a substantial amount of capacity will be available. Should capacity constraints develop, we conclude that the Gas Storage Rules require that "as-available" or "interruptible" transportation capacity should be allocated among all customers for that capacity, on a pro rata basis. We direct PG&E to file an advice letter with proposed tariffs, consistent with our decision, within 45 days of the effective date of this decision.