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California Consultant's Report Critical of SoCalGas

California Consultant's Report Critical of SoCalGas

Southern California Gas' so-far ill-fated attempt to sell a small metropolitan-based underground storage field is catching potential flak from regulators and nearby residents fueled by a 36-page report that accuses the nation's largest natural gas utility of unethical, if not illegal, business practices. A prehearing conference will be convened June 11 by an administrative law judge at the California Public Utilities Commission to begin an investigation into the alleged violation the regulatory body's rules.

SoCalGas officials strongly contend that they have done nothing wrong, and that through the CPUC investigation the utility expects to be fully vindicated in its handling of the storage field in recent years. Meanwhile, any potential sale has been put on hold.

Staff members at the CPUC consumer services division think the report by Consultant Margaret C. Felts is one of the more critical pieces ever submitted concerning the actions of one of the four major investor-owned energy utilities in the state. "Shocking" is how one staff member characterized the document. It offers three basic conclusions:

1. Over the course of the last four years, if not longer, SoCalGas (allegedly) has provided "inaccurate information to property owners, the CPUC and the courts about its current and future need for acquisition of the storage and mineral rights at the West Montebello Gas Storage Project."

2. SoCalGas (allegedly) misled a civil court concerning the authority it had to condemn storage and mineral rights under its CPUC certificate authorizing its operation of the storage field since 1956, and the fact that it needed those rights to continue operation of the field when it was concurrently making plans to sell the facility.

3. The utility (allegedly) in mid-1997 misled the CPUC by misrepresenting facts about the ongoing need to operate Montebello, causing the CPUC to give "a flawed analysis of events" to a state legislator who sought to investigate complaints of surrounding property owners who were being forced through eminent domain to sell their property and mineral rights in the field.

The report ends by alleging that SoCalGas followed a pattern of misleading regulators concerning the Montebello Storage facility-its only leased storage field-dating back to 1956 when it began natural gas storage operations. "(Southern California Gas) advanced inaccurate information to the (CPUC), leaseholders (for property and mineral rights) and the court."

In addition to the concluding points, the report by Felts alleges that at various times earlier in the 1990s, the utility manipulated the gas storage operations to affect the perceived value of the oil reserves still in place at Montebello, which originally was a working oil field owned and operated by Union Oil Company of California starting in 1939. The report also alleges that there may have been actions taken to assure that whether or not the field was sold, ratepayers-not shareholders-would pay for what are expected to be high costs for environmental clean-up at the field. The gas storage field is adjacent to a superfund landfill, one of the worst such sites in California.

Richard Nemec, Los Angeles

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