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Wild Goose Storage Raises Competitive Issues in CA

Wild Goose Storage Raises Competitive Issues in CA

A Canadian-backed merchant underground storage operator has raised a red flag in California's ongoing, but delayed, natural gas restructuring proceedings by questioning how new energy market players can compete with, but be dependent on, the state's major investor-owned utilities.

Wild Goose Storage, Ltd., a subsidiary of Calgary-based Alberta Energy Co., is focusing on the current issue of the proposed work and eventual costs of building a four-mile, 18-inch-diameter pipeline linking its newly developed storage facility in northern California with Pacific Gas and Electric Co.'s utility gas transmission pipeline about 50 miles north of Sacramento.

Despite interest by Wild Goose in building the line to PG&ampE's utility transmission pipeline, the utility is building the pipeline and then determining how much of those costs ultimately will be charged to Wild Goose's backers. "It is one of those situations that you come away from not feeling all that comfortable," said Phil Davies, Wild Goose's Calgary-based vice president and general counsel. "It is one of those situations where there is the potential - and I emphasize 'potential' - for conflict of interest. We're in a situation where PG&ampE competes with us, yet PG&ampE is building a facility for us and we can't criticize the costs because we can't get details on the costs."

Another issue that Wild Goose is raising in California's ongoing natural gas restructuring debate is how the customers of merchant storage or other nonutility-provided services are treated in the restructured world. For example, Wild Goose's contractual obligations stop at the storage facility. Each of its customers have to cut separate gas transportation deals with PG&ampE's utility transmission operations.

Davies references a 1992 California Public Utilities Commission decision that cited the need for "nondiscriminatory access by customers to an independent storage facility" as a policy issue that should be clarified for the future. A CPUC staff member assigned to the gas strategy said the regulators' proposed changes in natural gas assume an open-access approach to both transmission and storage. "We would like to see the CPUC taken at its word on that," Davies said.

"We have a good relationship with PG&ampE and we have a lot of respect for them, so I am sure we can work out the nitty-gritty of how we function on their system as we go along.

"Longer term, however, our concerns are that if there are structural conflicts of interest that leave the potential for abuse, we think it is wrong to leave the potential there."

Wild Goose is scheduled to open California's first market-based, merchant underground storage facility in April in a depleted dry gas field in the Sacramento Valley. It is offering 14 Bcf of inventory, with firm withdrawal capability of 200 MMcf/d and injection of 80 MMcf/d.

Richard Nemec, Los Angeles

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