2. Background
Wild Goose is an independent natural gas storage provider of firm and interruptible storage service at market-based rates. By D.02-07-036, the Commission authorized Wild Goose to expand its gas storage facilities in Butte County, California by 15 billion cubic feet (Bcf) to 29 Bcf and to interconnect the expanded facility with Line 400/401, the major transmission pipeline owned by Pacific Gas and Electric Company, via a new 25.5 mile, 36-inch bi-directional pipeline through Butte and Colusa Counties. At that time, the Canadian company EnCana Corporation (EnCana) owned Wild Goose.2
By D.06-11-019, the Commission authorized the transfer of control over Wild Goose from EnCana to a joint venture, Niska Gas Storage US, LLC (Niska Gas Storage) - 80% owned by Carlyle/Riverstone Global Energy and Power Fund II, L.P. (Carlyle/Riverstone II) and Carlyle/Riverstone III (collectively, Carlyle/Riverstone Funds3) and 20% owned by SemGroup, L.P. (SemGroup).
Carlyle/Riverstone Funds are two in a series of investment funds established by a joint venture between The Carlyle Group and Riverstone Holdings LLC to pursue private equity acquisitions in the energy and power sectors. SemGroup, through its subsidiaries, provides various energy services, primarily in the area of North American crude oil and refined products. Attachments 1-4 to D.06-11-019 summarize the extensive business holdings of SemGroup and Carlyle/Riverstone Funds, as well as the additional investments that Carlyle/Riverstone III and an affiliated fund, Carlyle Partners IV, acquired through their subsequent investment in Kinder Morgan, Inc. (KMI), which at the time held effective control over two California pipeline utilities, SFPP, L.P. (SFPP) and Calnev Pipe Line, L.L.C. (Calnev). That investment was part of a larger effort, involving other investors, to transfer ownership and control of KMI to Knight Holdco, LLC (Knight Holdco).4 By D.07-05-061, which authorized the Commission-jurisdictional portion of the transaction, Knight Holdco and its investors acquired indirect control of SFPP and Calnev through acquisition of KMI.
D.07-05-061 also approved a settlement which lays out the terms for an exemption for Goldman Sachs and AIG, two of the investors in Knight Holdco, from full compliance with § 852.5 Absent an exemption, that statute requires California Public Utilities and their affiliates to obtain Commission approval before purchasing stock in other California public utilities. The settlement terms include various reporting requirements.
2 See D.03-06-069, which subsequently fined Wild Goose $51,500 for finalizing the transfer of control over Wild Goose to EnCana from Alberta Energy Company, Ltd. (AEC) without first obtaining Commission authority under Pub. Util. Code § 854. The transfer of control occurred through the merger of AEC and PanCanadian Energy Corp., with the surviving entity renamed EnCana.
3 Reference to the constituent funds includes "their respective co-investment funds, parallel investment funds and alternative investment vehicles." (Petitions for Modification at 1.)
4 In addition to Carlyle/Riverstone III and Carlyle Partners IV, the investors in Knight Holdco consist of Goldman Sachs, AIG, and certain members of KMI's management.
5 Section 852 provides in relevant part:
No public utility, and no subsidiary or affiliate of, or corporation holding a controlling interest in, a public utility, shall purchase or acquire, take or hold, any part of the capital stock of any other public utility, organized or existing under or by virtue of the laws of this state, without having been first authorized to do so by the commission; provided, however, that the commission may establish by order or rule categories of stock acquisitions which it determines will not be harmful to the public interest, and purchases within those categories are exempt from this section ... (Section 852, Emphasis added.)
