Normally friendly and past partners in various deals, Pacific Gas and Electric Co. and Calpine Corp. are at odds over what the utility alleges is the merchant power plant developer/operator’s conspiring with merchant natural gas storage operators at Lodi in Northern California to bypass the PG&E utility backbone pipeline transmission system. As a result, PG&E’s utility alleges that natural gas retail customers could pay an extra $20 million.

The utility filed a strongly worded complaint with the California Public Utilities Commission late last month, and almost immediately Calpine fired back by calling the charges “unfounded and counterproductive to meeting the state’s policy goals.”

In the center of the controversy is Lodi Gas Storage, the state’s second underground natural gas storage facility operating on market-based rates. The utility objects to how Lodi uses its 33-mile pipeline connection to the PG&E utility transmission pipeline system. The utility alleges that Calpine has a connection between the utility backbone system and the storage field and some gas gets diverted that never goes in and out of storage.

Under CPUC provisions, Lodi is suppose to restrict the 33-mile pipeline’s use to taking gas supplies in and out of its underground storage field. Calpine owns and operates its own power plants and natural gas production fields in the Sacramento Delta area, including various gas gathering lines.

A spokesperson for Calpine on Wednesday refused to say more than was already included in a prepared statement from July 25. Later this month, the spokesperson said, the company will formally respond to PG&E with a filing to the state regulatory commission.

“The issues raised in the complaint are currently before the (CPUC) in a separate PG&E-initiated (complaint) proceeding and ongoing workshops sponsored by the California Energy Commission and state Division of Oil and Gas and Geothermal Resources,” Calpine said in its prepared statement. “Calpine has worked with PG&E, and will continue to work with PG&E, to resolve these issues in an appropriate manner.”

PG&E’s utility alleged that Calpine is avoiding paying franchise and transportation fees by avoiding the connection with the utility, and in its CPUC filing, it compares this behavior with the “round-trip trades” in the electric wholesale power trading market and a so-called “megawatt laundering” scheme associated with the Enron scandal and the wholesale market manipulation investigations. PG&E’s complaint called the transaction between Lodi Storage and Calpine “natural gas laundering.”

The utility is asking the CPUC to stop the Calpine-Lodi transactions and order the companies to pay back fees and charges.

While referring to PG&E as a “valued and long-time customer/supplier,” Calpine argued in its prepared statement that it owes no charges because its gathering system that is connected to Lodi’s storage project serves solely the Calpine power generating facilities, using Calpine gas or gas it has purchased from third parties. PG&E’s utility and its retail customers are not involved in any way, so the fees are not applicable, the company argued.

Defending its connection with Calpine, Lodi Storage’s Scott Wilson, an operating vice president, said the storage operator is a “public utility,” and as such, it must offer open access. “It is really for the good of the state to provide open access to ensure the adequate and reliable supply of natural gas,” Wilson said in a report in local news media.

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