CA Merchant Storage Gains 11th-Hour Reprieve from Regulators
In what is becoming a bizarre case of concern to future merchant
energy project proponents, California regulators rescued a second
merchant underground natural gas storage project from the trash
heap Thursday by refusing to support a recommendation to deny the
proposal and postponing the item for a future meeting. An
alternative to the proposed administrative law judge (ALJ) decision
is likely to be developed by one of the members of the California
Public Utilities Commission.
So, there is still life for the $80 million Lodi Gas Storage
Project and 35-mile transmission pipeline to connect with Pacific
Gas and Electric Co.'s backbone pipeline system, despite an unusual
proposed ALJ decision that oks the Lodi Project's environmental
impact report, but recommends the project not be built by
misapplying a local need criteria.
The proposal has stirred concerns among unlikely allies such as
PG&E and the CPUC's consumer advocacy division, the Office of
Ratepayer Advocates (ORA), both of which think the ALJ's proposal
would set a troubling policy if any future energy infrastructure
projects require a "greater local need" than the state as a whole.
ALJ Janet Econome acknowledges a state law and CPUC policy
encouraging merchant gas storage projects for the state as a whole,
but disregards them in finding that despite an acknowledged
statewide need, "the record does not show a specific need for this
(Lodi) project in the general Lodi community."
"This means if you need electricity in LA, you better build the
power plant in LA because the project should be where the local
need is greatest," said Jim Fossum, California project manager for
Texas-based Western Hub Properties, the sponsors of the Lodi
"It is a complete 180-degree turn in policy for the CPUC if it
takes this stance, and says we'll never do another project of any
kind in California again, including putting up transmission lines,
telephone rights-of-way, etc."
After experiencing about a year's delay so far because the
project --- unlike an earlier merchant storage project now
operating (Wild Goose Storage) --- was required to complete a
full-blown environmental impact report, Western Hub Properties
completed the EIR in late February and was expecting a final
decision by mid-year to start construction this summer. The ALJ's
negative conclusion has cast doubt on the project, but Fossum
remains optimistic, and in fact, is pursuing a second merchant
storage project in the state.
PG&E in a March 22 filing recommending that the CPUC reject
the proposed negative decision is unsparing in its criticism,
particularly regarding the proposed decision's potential "chilling
effect" on other gas and electric projects. "(The proposed
decision) would frustrate the goals of PG&E --- and this
commission --- in providing for safe and reliable gas and electric
service (not merely gas storage) for our state.
Fossum said that because of its unique geographical proximity to
key electric generating plants, the Lodi project will be the only
underground storage project in the state offering fast
deliverability to meet the needs of an increasingly competitive
electric generation market that needs quick in- and out-capability
from gas storage. The Lodi project is planned for 12 Bcf of natural
gas working capacity, with 400 MMcf/d injection and 500 MMcf/d
Richard Nemec, Los Angeles