ALJ/XJV/eap DRAFT Agenda ID # 777

7/17/2002

Decision PROPOSED DECISION OF ALJ VIETH (Mailed 6/17/2002)

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 20

6. Interconnection Issues 22

6.1 Scope of the Required Interconnection Facilities 22

6.2 Allocation of Costs for Interconnection Facilities 23

6.3 Operating and Balancing Agreement 27

7. Backbone Transmission Service Issues 27

7.1 What Level of Transmission Service Will Be Available on the PG&E Backbone Upon Interconnection of the Wild Goose Expansion? 27

7.2 Transportation Service for Gas Storage Withdrawals 30

7.3 Brief Overview: Backbone Expansion and Alternatives 34

8. Review Under CEQA 36

8.1 EIR Preparation Process and Public Review 37

8.2 The Proposed Project and Project Alternatives 39

8.3 Environmental Impacts and Mitigation Measures 41

8.4 Certification of the EIR 42

9. Conclusion 43

10. Comments On Proposed Decision 44

Findings of Fact 44

Conclusions of Law 49

ORDER 52

ATTACHMENT A - List of Appearances

ATTACHMENT B - Mitigation, Monitoring and Reporting Program

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 per day (Bcf/d) 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. In 1997, when the Commission granted Wild Goose a CPCN for the existing facility, it did so on the premise that Wild Goose, then a new market entrant, had no market share, and thus, no market power. The evidence shows that that may no longer be the case. Consequently, while we authorize the expansion project and market-rate authority for it, we condition our approval upon the application of the Commission's 1997 Affiliates Transactions Rules to Wild Goose and also require Wild Goose to comply with other enumerated reporting requirements, so that we may monitor developments in the evolving marketplace.

The decision 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.