A Canadian-backed merchant underground storage operator hasraised a red flag in California’s ongoing, but delayed, natural gasrestructuring proceedings by questioning how new energy marketplayers can compete with, but be dependent on, the state’s majorinvestor-owned utilities.

Wild Goose Storage, Ltd., a subsidiary of Calgary-based AlbertaEnergy Co., is focusing on the current issue of the proposed workand eventual costs of building a four-mile, 18-inch-diameterpipeline linking its newly developed storage facility in northernCalifornia with Pacific Gas and Electric Co.’s utility gastransmission pipeline about 50 miles north of Sacramento.

Despite interest by Wild Goose in building the line to PG&ampE’sutility transmission pipeline, the utility is building the pipelineand then determining how much of those costs ultimately will becharged to Wild Goose’s backers. “It is one of those situationsthat you come away from not feeling all that comfortable,” saidPhil Davies, Wild Goose’s Calgary-based vice president and generalcounsel. “It is one of those situations where there is thepotential – and I emphasize ‘potential’ – for conflict of interest.We’re in a situation where PG&ampE competes with us, yet PG&ampE isbuilding a facility for us and we can’t criticize the costs becausewe can’t get details on the costs.”

Another issue that Wild Goose is raising in California’s ongoingnatural gas restructuring debate is how the customers of merchantstorage or other nonutility-provided services are treated in therestructured world. For example, Wild Goose’s contractualobligations stop at the storage facility. Each of its customershave to cut separate gas transportation deals with PG&ampE’sutility transmission operations.

Davies references a 1992 California Public Utilities Commissiondecision that cited the need for “nondiscriminatory access bycustomers to an independent storage facility” as a policy issuethat should be clarified for the future. A CPUC staff memberassigned to the gas strategy said the regulators’ proposed changesin natural gas assume an open-access approach to both transmissionand storage. “We would like to see the CPUC taken at its word onthat,” Davies said.

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

“Longer term, however, our concerns are that if there arestructural conflicts of interest that leave the potential forabuse, 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 drygas field in the Sacramento Valley. It is offering 14 Bcf ofinventory, with firm withdrawal capability of 200 MMcf/d andinjection of 80 MMcf/d.

Richard Nemec, Los Angeles

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