Findings of Fact

1. Emergency concerns for which utility should plan include the failure of a major component of the delivery or storage system, an artificially induced constraint on the flow of gas, a sudden or persistent loss of supply, an unpredicted and unplanned-for rapid increase in demand, or an excessive increase in the market price for gas.

2. We want to encourage a balanced reliance on stored gas because of the seasonal difference in gas demand and price, because there is a substantial storage capability, and because stored gas is an important physical hedge.

3. It is not enough to know that the combined available pipeline capacity and storage withdrawal rights exceed peak demand by a certain amount. It is necessary to know that sufficient gas will be stored and that withdrawn gas can be delivered where it is needed when the system is most severely stressed.

4. For planning purposes, PG&E, SDG&E and SoCalGas appear to have depended on shippers choosing to use storage fully at peak, and either assumed that stored gas could be delivered during peak conditions, or disregarded the issue.

5. Enough capacity on the backbone system to satisfy demand on an average day is not adequate for system planning purposes if planners cannot depend on stored gas to make up the difference on the most severe peak day.

6. It is reasonable to require that each of the utilities plan its backbone system to meet one-in-ten year cold and dry conditions.

7. It is reasonable to require that each of the utilities plan their backbone and storage systems so as to meet the peak day criteria already in place for their local transmission systems.

8. Reserve margins on backbone pipelines have routinely been in the 40% to 50% level.

9. Consumer advocates, pipelines and LNG suppliers all support the slack capacity margins proposals put forth by SDG&E, SoCalGas and PG&E.

10. SCE opposes the slack capacity proposal of SDG&E and SoCalGas.

11. The slack capacity proposals appear reasonable, but we have no quantifiable basis upon which to decide the "right" number.

12. We are comfortable with the backbone transmission capacity of the utilities.

13. We are comfortable with the slack capacity ranges proposed by the utilities.

14. To protect the integrity of the system and to ensure the ability to respond to emergencies, SoCalGas must track and document receipt point constraints, determine whether they are temporary or long-term, and respond accordingly.

15. For potential receipt point expansion, the appropriate balance is one where the utilities are not required to maintain and continually update the estimated cost of various expansion options, but are obligated to produce detailed cost estimates on request, in a reasonable amount of time, at a reasonable cost.

16. Six to eight months is not a reasonable timeframe for responding to a business request for a receipt expansion cost estimate in this world of constantly fluctuating gas prices, even taking into account the iterative nature of the exercise.

17. Assuming that PG&E's hypothetical situations reflect the outward boundaries of likely contingencies, PG&E's contention that its storage capacity is adequate would appear to be reasonable.

18. Although SoCalGas asserts that there are other realistic storage options for Southern California shippers due to the presence of Wild Goose and Lodi Storage to the north, SoCalGas has not offered sufficient evidence to support this contention.

19. SoCalGas' unbundled storage capacity and injection rights have been oversubscribed in recent years, and withdrawal rights sales have hovered at about 80% of the total amount available.

20. It is unrealistic to rely on the exercise of all withdrawal rights if customers are not required to inject enough gas or to exercise their withdrawal rights, or if SoCalGas cannot deliver all of the withdrawn gas to the customer.

21. Planning backbone transmission facilities to meet all extreme conditions would result in a needless build-up of capacity.

22. Storage serves purposes far beyond price hedging, and provides certainty that cannot be matched by a reliance on flowing supply.

23. Neither SoCalGas nor its unbundled storage customers could rely exclusively on flowing supply in lieu of storage.

24. SDG&E and SoCalGas have recently filed with the Commission in A.06-08-026, their settlement agreement with SCE which, among other things, would place a cap on the prices of storage products. The Commission may review unbundled storage services charges and other storage issues in this application, to determine if the settlement agreement adequately addresses the parties' concerns.

25. All parties (with the exception of Lodi) support the contention that the current backbone pipeline and storage infrastructure are sufficient.

26. We have no reason to believe at this time that the utilities' storage facilities are inadequate.

27. When all customers have to rely on a single network of pipes and storage, self-interest is not always consistent with that of the greater body of customers.

28. SDG&E and SoCalGas, in their open season proposal, require customers to commit to 5- or 10-year use-or-pay firm daily transportation payments or risk the utilities maintaining an undersized local transmission system.

29. The record does not suggest why 5 years or 10 years would be the correct period.

30. In D.04-09-022, the Commission directed SDG&E and SoCalGas to file a new application (A.04-12-004) to consider issues related to SDG&E/SoCalGas system integration, tradable firm rights, and off-system sales. We are considering tradable rights in the second part of that proceeding, which is now underway.

31. Tradable rights for congestion on the local transmission system is not being addressed in A.04-12-004.

32. A proposal for tradable rights on the local transmission system was offered by SoCalGas / SDG&E in the instant proceeding.

33. An exclusive reliance on long-term commitments to determine system adequacy would not do enough to ensure that the system would function well during emergencies, since an integrated system such as this must be planned and managed in an integrated way.

34. Although the Commission has allowed the utilities to make use of open seasons, it has not authorized them to abandon other means of forecasting and planning to meet demand.

35. Interstate capacity might be more valuable than local transmission capacity because its use is less location-specific and it is more tradable.

36. It is appropriate to roll into general rates many expansions that are required as part of the 1-in-10 year planning process. However, for those expansions required largely to serve individual projects, such as LNG terminals, the policy established in the Phase I decision (D.04-09-022) applies.

37. Securing needed firm interstate gas pipeline capacity rights is an important element of electric utility resource planning and an important factor in assuring the reliability of the natural gas delivery system.

38. First-in-time cost allocation for receipt point expansion is a crude and, in some ways, unfair approach.

39. One of the most significant reasons for imposing incremental expansion costs on the entity creating the demand is to enable the incremental customer to take those costs into account when siting its facilities, or when making a commitment to procure gas from a geographically-specific source.

40. Electric utilities should demonstrate, as part of the integrated resource planning process, that they have taken all necessary steps to ensure gas supply.

41. We reject Woodside's proposal to require utilities to identify all potential suppliers interesting in obtaining access to capacity expansions and allocate costs equally.

42. The standardized interconnection, and operational and balancing agreements as described and modified in this decision are reasonable.

43. The proposed independent storage provider agreement described in this decision is reasonable in light of the entire record, consistent with the law, and consistent with the public interest.

44. All parties support changing the gas quality tariffs of SDG&E and SoCalGas.

45. Approving changes to SDG&E's and SoCalGas' tariffs now will provide regulatory certainty to LNG developers and other potential natural gas suppliers.

46. The NGC+ White Paper concludes that the Wobbe Index is the most robust single gas quality parameter.

47. No application has been filed for an LNG terminal that would supply gas directly to PG&E's service territory.

48. Historical gas supplies in PG&E's service territory differ from historical gas supplies in SDG&E's and SoCalGas' service territories.

49. The feasibility and cost of managing a pipeline system with regional standards is uncertain.

50. A regional standard in the South Coast Air Basin may be impossible to effect.

51. A restrictive regional standard could become the de facto system-wide standard if a supplier cannot guarantee that its supplies will not flow into the restrictive region.

52. The maximum Wobbe Index is important since LNG supplies could have relatively high Wobbe Indices.

53. Diversifying California's gas supply sources is a state policy adopted in the EAP II.

54. Increased sources of natural gas supplies will lower natural gas costs.

55. Lower natural gas costs will reduce the energy bills of California's natural gas and electricity consumers.

56. Most Asia-Pacific LNG supplies have high Wobbe indices when compared to traditional natural gas supplies in California.

57. Conditioning costs will raise the hurdle price that LNG importers require to ship gas to the California market, and could be passed on to consumers.

58. Increases in the sources of natural gas supply will lower natural gas costs and will enable broader use within California, displacing the use of other less environmentally friendly fuels.

59. The District proposes a maximum Wobbe Index standard that is intended to maintain the status quo until further studies have been completed.

60. The NGC+ White Paper lists eleven different undesirable performance behaviors and emissions characteristics that can result from changing natural gas quality.

61. NGC+ White Paper is the consensus recommendation of a group composed of representatives of all major segments of the natural gas industry, including LNG suppliers, natural gas pipelines, utilities, power generators, industrial process gas users, appliance manufacturers, and natural gas processors.

62. The NGC+ Work Group reached its recommendation based on the available information and recommended specific additional studies.

63. The NGC+ White Paper identifies data gaps and recommends a gas quality standard consistent with those gaps.

64. Further research is needed to fully understand the impacts of higher Wobbe Index gas on emissions and end-use equipment performance.

65. LNG developers need regulatory certainty today to design and build LNG import projects and arrange for sources of LNG supply.

66. FERC has recommended that interstate gas pipelines and their customers use the NGC+ interim guidelines as a reference point for resolving gas quality disputes.

67. NGC+ recommends adopting a Wobbe range equal to plus and minus four percent of average historical gas subject to a maximum Wobbe of 1400.

68. Applying the NGC+ recommendation to the five-year historical average Wobbe Index in the SoCalGas service territory, 1332, results in a Wobbe range of 1279 to 1385.

69. The NGC+ White Paper recommends that service territories with demonstrated experience with supplies exceeding the recommended Wobbe Limits may continue to use supplies conforming to this experience.

70. Most Btu districts in SDG&E's and SoCalGas' service territories have not experienced gas with a Wobbe Index higher than 1385.

71. Turbines can be recalibrated for a new gas quality standard during routine recalibrations.

72. The Wobbe and Heating Value requirements constrain the possible combinations of hydrocarbons that compliant gas can contain.

73. SDG&E and SoCalGas proposed to reduce the maximum permitted carbon dioxide content from 3 to 2 percent and reduce the maximum oxygen content from 0.2 to 0.1 percent.

74. The intrastate pipeline systems are complex, and the gas flows change constantly based on shifts in supply and demand.

75. Five percent of California production could meet the current CARB CNG specifications.

76. The CARB CNG specifications could limit LNG supplies.

77. Natural gas vehicles consume a small fraction of the total volume of gas consumed in the state.

78. The current CARB CNG specifications are only necessary for a small subset of vehicles within the current natural gas vehicle fleet.

79. PG&E, SDG&E, and SoCalGas proposed a number of minor changes to bring the tariffs of the utilities into closer alignment.

80. California production plays an important role in the state's supply portfolio.

81. The NGC+ White Paper recommended that additional research on gas quality be performed to fill specific data gaps.

82. The U.S. Department of Energy, the California Energy Commission, trade organizations, specific companies and other stakeholders are researching the effects of natural gas quality.

83. Kern may require at least twelve months to make any necessary changes to its FERC tariff.